Marrying Someone with Student Loan Debt: What You Both Should Know
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If you are planning on marrying someone with student loan debt, you won’t be alone. As of May 2017, roughly 44 million Americans owed nearly $1.44 trillion on their student loans. And one estimate suggests the average student from the Class of 2016 owes $37,172. Worse, the Federal Reserve Bank of New York reckons 11 percent of all student loans were seriously delinquent (90+ days overdue) in the first quarter of 2017.
Of course, couples getting married are likely to prioritize love over money. If you are thinking of dumping your fiancé(e) over a bit of student debt, you probably should not have got engaged in the first place. But that doesn’t mean you should ignore any serious debt problems your prospective spouse may have, not least because financial rows may be the most important predictor of divorce. A couple of years ago, SunTrust Bank commissioned a Harris Poll survey that found finances topped the list of reasons why couples were experiencing relationship stress. As many as 35 percent of participants identified finances as the primary cause of their problems.
Having a conversation about financial matters early in a serious relationship may not be desperately romantic, but it might improve your chances of having a long and successful marriage. As Rilla Delorier of SunTrust observed in a statement that accompanied the survey results:
Every couple shares dreams that require an open dialogue on finances – whether it’s planning for the future, opening a business together, buying a house, having a baby or taking a vacation. Laying the financial groundwork to make these aspirations a reality can be an uplifting process that strengthens the relationship.
Student Loans and Marriage: Communication is Key
Let’s get one common misunderstanding out of the way: You will not become legally responsible for your new spouse’s debt when you marry. Even if you live in one of those states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin and in some circumstances Alaska) that have “community property” laws, you do not assume liability for debts that predate the marriage, according to legal website NOLO.
How Much Debt Are You Each Bringing Into the Marriage?
However, marrying someone with student loan debt – or, indeed, any significant debt – can create some serious issues within your relationship, especially if payments create a disparity in your spending powers. Suppose the two of you agree your spouse should continue to shoulder the entire burden of the loan. That might mean he or she is unable to afford all the things you can. Perhaps you will have to live in a less desirable home, forgo date nights, put off having a child, and generally have a cramped lifestyle. And what happens when the two of you are invited to a distant wedding or a family event over the holidays, or just need a vacation but he or she can’t afford it? Are you going to go alone or subsidize your other half?
Alternatively, you may agree to pool your finances, so you end up paying a big chunk of your husband or wife’s old debts, which might have been taken on before the two of you even met. Some people would be perfectly happy with such an arrangement, but others would find it wearing thin pretty darned quickly. Be honest: into which group do you fall?
And consider what will happen if you or your spouse are hit by sickness, a bout of unemployment, or some sheer bad luck. Unless the other has a very high income, your household finances are likely to take a big hit, and an onerous debt could cause real hardship. You may not be legally liable for your husband or wife’s debt, but you will certainly be affected by the stress your spouse is experiencing, not to mention the harassing calls and visits from collection agencies, and late payment penalties that just increase the burden.
Love and Debt
Learning to accommodate each other’s financial habits and foibles is a part of every marriage. But it is a whole different thing to lob a financial grenade into a relationship, especially early on. That is why many financial and relationship experts recommend you have an in-depth finance conversation before marrying someone with student loan debt.
While this conversation may be deeply unromantic, it can save a relationship later on. Talk through your finances: the state they are in now, what your goals are, and how you intend to achieve them. It can be thought of as a negotiation. You want to find common ground so you can share an understanding of where you currently are financially, where you both want to be, and how you are going to get there.
Debt is an essential part of this discussion and full disclosure is the only policy. This can cause real anxiety if one party has high levels of student and other debt, but it is profoundly unfair to enter a marriage while withholding information that could materially affect your fiancé(e)’s future happiness. Marrying someone with student debt is one thing. Marrying someone with student loan debt that is undisclosed in quite another. And imagine your relief when you have come clean.
Who Is Going to Pay Off the Student Loans?
Deciding who is going to take responsibility for paying down student loans is a key part of the conversation. But there are no right or wrong answers.
It is easy for couples who immediately merge their finances on marriage. They regard all income, assets, and liabilities as equally shared. Existing debt can be more contentious for those who prefer to remain financially separate.
Student Loans Can Be “Good” Debt
For the latter group, existing debts would normally remain the responsibility of the original borrower. But some would argue that student loans should be an exception.
That is because they can be regarded as “good” debt. In other words, they can be seen as money borrowed in order to invest in the future prosperity of the person and his or her family. In that sense, it is a bit like a mortgage. How persuasive that argument is might depend on how the material benefits (if any) flowing from the qualifications and skills acquired through higher education will be shared.
Do Either of You Plan on Going Back to School?
If one or both of you plan to return to school and take on more student debt, that should definitely be expressed. Being absolutely clear now about who is going to be responsible for future student loans could prevent relationship-threatening resentment further down the road. And, of course, it could affect how you view existing student loans.
Those who live in “community property” states (see above) should be aware that, legally, they may be jointly liable with their spouses for any debts taken on while they are married. And that includes new student loans.
Paying Off Student Loans Before Marriage
The threat posed to your relationship by student loan debt can be very real. Indeed, you may wonder if some marriages have ended up on the rocks as a direct result of such debts. This is why some experts urge couples to wait to tie the knot until both parties are free and clear of their loan obligations.
This may be sage advice for some facing extreme circumstances. But many would be unwilling to delay their nuptials for what might be a decade or more and this often could be the time it takes to pay back student loans. Providing loan payments are manageable and you have no reason to expect this to change, you may prefer to carry on and get married.
How Does Getting Married Affect Student Loans?
You may not assume legal responsibility for debts your spouse acquired before your wedding, but your marriage could still have an impact on existing student loans.
Income-Driven Repayment Plans
This certainly applies if you have federal student loans and are on an income-driven repayment plan. That is because the formula used to calculate how much you must pay is partly based on the size of your family and your household income.
So, increasing the size of your family by marrying will reduce your “discretionary income.” That is the amount your household earns above 150 percent (in all but one repayment plan) of federal poverty thresholds, which vary by family size. If your new spouse brings additional dependents, that could see a big rise. The more people in your household, the bigger the threshold and the less you’re likely to pay on your loan – right down to zero. You can find current thresholds – and see the impact of additional family members on them – on this government website.
However, if your new spouse brings in a significant salary, that will increase your household income, and you could end up having to pay more toward your student loan. Find out more at Everything You Need to Know About Repaying Student Loans, which has a section on income-driven repayment plans and includes links to further information on government websites.
Can Married Couples Consolidate Student Loans Together?
Private student loan consolidation can be highly beneficial. With multiple private loans, you effectively refinance your student debt into one loan, which may have a lower interest rate than your existing ones. Whether you get a lower rate will mostly depend on the general level of interest rates when you apply, and whether your credit score has improved since you first took out your loans.
This could save you money, and it will certainly reduce your administrative burden. You will have just one loan, one loan servicer, one statement, and one payment each month.
Consolidating Federal Student Loans
You can consolidate federal student loans, too. And that could see your loan term (the time it lasts) extended, thereby reducing your monthly payments. It’s important to bear in mind the longer you borrow, the longer you have to pay interest, so extending your term has downsides.
There are other pros and cons to consolidating federal student loans, and you can learn more on the relevant page of the U.S. Department of Education’s website.
Two Spouses Cannot Consolidate All Their Loans Into One
Each spouse is free to consolidate his or her student loans into one before or after marriage and that may well be smart, but it is not possible to roll up both spouse’s student borrowing into one, big super-loan. The minimum you can end up with is two: one each.