Marriage is a huge commitment between two individuals and it’s a time of happy beginnings and starting a life with one another. Unfortunately, adding student loans into the mix can make things quite complicated. According to a recent study on debt and marriage by the NFCC, it was found that 37 percent of respondents said that they would not marry their significant other until all debts were paid off. Another 46 percent of respondents said that they were willing to get married to a person in debt and work together to pay it off. The final 10 percent of those participating in the study said that they would still marry the person, but that they wouldn’t help pay off their debt.
Whichever of these categories you fall into, there are important things to know before entering into a marriage with preexisting student loan debt.
How Much Debt Do You Have?
Before walking down the aisle, you need to sit down and have a serious talk about the amount of debt you both have. Chances are that not just one partner is entering the marriage with debt. Most couples nowadays both have student loan debt that can be quite substantial when put together. If you haven’t had this type of talk yet, it’s time to lay it all out on the tablet and be real about your situation. For example, if one person has a significant amount of student loan debt while the other person has none, this could cause friction in the marriage later on.
If the both of you have student loan debt, it can be difficult to manage, especially if neither of you are financially stable or have solid careers that pay well. You’ll need to consider this loan debt before planning for larger investments such as purchasing a home or starting a family together.
Whatever your circumstances may be, you both need to tackle any financial hurdle together because this is what marriage is all about. This includes any debt that one or both parties bring into the relationship. Couples need to be as transparent as possible with one another when it comes to their debts and making plans to pay it all off.
Remember That Your Income Can Change
Oftentimes, people pay off their student loan debt according to their incomes. This is fine when your income is stable and you know how much you bring home every payday, but marriage can change this substantially. For example, if you file your taxes as a married couple filing jointly, you will now have a combined income with your partner, raising your income-based repayment bill and causing it to literally go through the roof. Also, certain repayment plans aren’t meant for married couples who file jointly and you’ll automatically be removed from the plan altogether once you tie the knot. This is due to the fact that many income-based repayment plans are based on what you earn. One way to avoid this hurdle is to file as a married couple filing separately. While this doesn’t qualify you for the tax benefits married couples get, you’ll be able to stay on your repayment plan.
Another important note to keep in mind is that your income may change over the course of the years you’re married. For instance, if you or your wife gets pregnant, they will probably stop working either throughout the pregnancy or for good, depending on how they handle taking care of the child after they’re born. If you have been able to easily pay off debt together with both incomes combined, remember that this may not always be the case.
An option to consider for student loan sufferers who are getting married is to go with an ICR plan, which doesn’t take your income into consideration when setting up a payment schedule. These plans tend to be higher than most others out there and you could wind up paying more for your debts long-term than you normally would. You should talk to a tax specialist before making any final decisions on how to pay off student loan debt and figuring out what’s best for your financial situation.
Your New Spouse May Be Responsible for Loans
Once you get married, you are both responsible for each other’s loans. Most federal and state lenders will excuse loan debt once the borrower dies, but many private lenders don’t offer this option and you’ll still be paying it off long after your loved one passes away. It is important to read the fine print on any loan agreement before taking a loan out. If you both co-sign loans together, you’ll be responsible for paying it off even if you get separated. Even if you don’t co-sign the loan together, your spouse may still be liable for all student loans you take out. This is the case for individuals taking out loans in a community property state like Arizona, Idaho, Louisiana, California, Texas and Wisconsin. Your spouse can even have their wages garnished if you are in default on your own personal student loans, which puts you both in a rather precarious situation.
Your Can’t Refinance Together
Refinancing and consolidating is crucial for loans that are expensive and overwhelming, but it’s important to note that you cannot pursue refinance for federal loans as a couple. You can only consolidate your loans if you’re doing so individually. The reason this law was put into place after July 1, 2006 was because consolidation was proving to be a problem with divorcing couples who didn’t want to be tied to each other’s loans any longer.
If you both have your heart set on refinancing student loans together to make payments more reasonable, it’s important to remember that you won’t be able to do it as a couple but will instead need to go your own separate routes.
Let’s face it, getting married is a wonderful experience and no amount of student loan debt will get in the way of a couple truly in love. However, it’s important that both parties enter into the marriage fully aware of the other’s debts. The last thing you want to do is to get divorced over financial problems that could have otherwise been avoided.