While the thought of talking to your future spouse about your student loan debt is probably about as appealing a root canal, it is crucial for any marriage to launch with forthright conversations about finances. The debt you bring into the marriage will have an impact on your partner.
While your student loan information is certainly private, your partner has a right to understand your financial obligations before the two of you say “I do.” This article will explain how student loan debt can affect your marriage and suggest steps to take when tackling debt before and after your big day.
How Student Loan Debt Can Affect Your Marriage
One of the hardest things for couples to figure out with marriage and student loan debt is how to approach the tax issue. The way you choose to file your taxes once married can greatly impact the payment structure of your student loans. If your federal student loans are currently relegated to an income-driven repayment plan, getting hitched can change your repayment schedule.
Filing your taxes as “married filing jointly” means that your income and that of your spouse will be combined into one adjusted gross income. In turn, this means your monthly federal student loan bill could see a significant increase. Depending on the size of the increase and your salary, the difference could mean having to rely on your spouse’s support to pay.
Certain income-sensitive repayment plans are not available to borrowers who report joint income. This is because qualification for income-based repayment often hinges on the fact that your monthly payment will not exceed whatever it would be under a standard repayment plan.
There is always the option to file as “married filing separately” when tax time comes. The benefit of this is that it usually results in a lower income-driven monthly payment. The downside is that separately filing can affect other aspects of your finances and debts. This means you would remain ineligible for many of the perks of filing jointly.
Can My Spouse Be Made Responsible for My Student Loan Debt?
You may wonder what marriage and student loan debt have to do with one another. You took out your loans on your own, and that is that, right? Wrong. There are several scenarios in which your student loan debt could fall to your partner to repay.
The first and most extreme of those examples is what is known as a “death discharge,” and the question is whether your loan has one. No one wants to envision the worst when planning a marriage, but forming a union that will be legally binding means talking about what will happen if one of you passes on early.
All federal student loans come with a death discharge, which means that if your partner passes away, you will not be held accountable for his or her debts. Many private lenders do not offer this service, though, and will come to collect the balance. Check with your lender so that you can know how to plan appropriately for this scenario.
Another way your marriage and student loan debt can intersect is if you go back to school and your partner co-signs on your student loan. If his or her name is on the loan document, even if it is your loan, accountability could fall to your partner if you default or cannot make payments for any reason.
Some states function under what are called “community property” laws. This means that if you took loans out while you were married, even if your spouse never co-signed on anything, he or she will be held responsible for your debt because it is classified as a responsibility that belongs equally to both of you. This can represent a serious discussion even for couples with no current debt because one partner might be contemplating returning to school.
Similarly, in the unfortunate event that you face a separation, or your student loans are in default, your spouse’s wages could be considered fair game. You and your partner should work together to come up with a response to these potential scenarios.
Make an Honest Assessment
The way that your marriage and student loan debt coincide does not have to provoke feelings of fear or stress. Arrange this talk around long-term financial goals and milestones. Talking about future, big-ticket purchases, like a house or vehicle, can be an exciting and hopeful conversation in any relationship. Use that same energy by being honest with your partner about where you are financially right now.
Being transparent is the first step when making a successful payoff plan for any student loan debt. Be patient and considerate of where each of you is coming from. Like so much else that pertains to relationships, a lot of what we know regarding finances comes from our families.
Some people may come from a background where their parents never really discussed finances, or one parent took the lead while the other kept the books. There is no wrong approach to discussing marriage and student loan debt except the approach that avoids discussing it at all. The conversation should not bring shame, embarrassment, or feelings of being overwhelmed to either party.
Both parties need to recognize that student loan debt repayment may change upon marriage, as some repayment plans base qualifications on household income and family size. If your partner makes a significant amount of money, you may see your payment go up. Even if your partner is not working or makes less than you, you may see your payment go up due to there being two of you that the loan company is now counting as “family.”
Read the fine print on all of the loans that you and your partner currently have, as well as any you might be considering for later. Then, develop a plan that addresses as many scenarios as possible.
This plan’s details are going to vary wildly from couple to couple, as partners factor in aging parents, career goals, differences in savings, and more. Being a team may require one of you to put personal advancements on hold to support or help the other.
What About Refinancing?
One option that many couples believe will make their marriage and student loan debt situation easier is refinancing their separate loans into a single payment. However, there can be some unseen hang-ups with that choice.
Some private lenders will allow couples to refinanace their loans. However, any federal student loans that you or your partner have would only be eligible for refinancing as individuals. Federal student loans cannot be refinanced as a couple, so learning what could potentially work for you and your spouse may entail some investigation into the types of loans you have.
Tackling Student Loan Debt Together
Avoiding a frank conversation about your marriage and student loan debt can cause unhealthy friction in your relationship later. Some partners may wish for personal debt to be cleared before marriage, and others might be more than willing to help pay off the tab together.
Even if your partner’s student loan debt doesn’t appear on your credit report, your credit reports can factor into your eligibility for certain purchases. One or both of you may also wish to visit a financial counselor if professional mediation or skilled opinion would be helpful. Most importantly, remember that this discussion is intended to help ensure a “happily ever after” in your marriage, not prevent one.
You may also want to take advantage of CollegeFinance.com’s detailed resources and guides so you can find the right path for your student loans and marriage.