Married with Student Loans: What You Need to Know
You're newly engaged and already daydreaming about where to go for your honeymoon. But have you given thought to how being married with student loans will affect you and your partner's financial future?
Learning how marriage can affect student loan debt repayment is an important part of pre-wedding planning, and it shouldn't be overlooked. Use the information below to make informed decisions about how to pay off your debts as a married couple.
Start Your Couple's Debt Management with a Conversation
Sitting down to discuss each of your debts is one of the five most important money conversations you can have with your future spouse. And it's certainly the first step in managing debt as a couple.
Not only should you each talk about the student loan debts you're bringing into the marriage, but it's also a good time to reveal your assets and incomes as well. Consider sitting down and making a list to help with future conversations. With a list of each other's debts, assets, and incomes, determine how being married with student loans will result in changes to your debt management so that you can come up with a good strategy moving forward.
Get Informed About How Student Loan Debt Changes with Marriage
Besides being a spiritual union between two people, marriage is also a financial union. One of the first ways you'll feel this is through changes to your student loan debt management.
Each of the four types of federal student loan income-driven repayment plans calculate minimum payments based on things like household income and family size — both of which will change once you're married. Additionally, you may see changes to your minimum payments due each month depending on the type of student loan repayment plan, your new tax filing status, and the amount of your partner's student loan debt.
You can see a change when filing taxes each year, as well. That's because while individuals meeting income requirements can claim a student loan tax deduction of up to $2,500, if your household status becomes married filing separately, then you cannot claim this deduction at all.
You should also know that while you're not financially responsible for your spouse's student loan debt that they bring into the marriage, you can become responsible for it if you jointly consolidate student loans, or if you co-sign for more student loans for them. The IRS can even garnish part or all of any joint tax returns if your spouse doesn't pay the federal student loans they incurred before marriage (you can file IRS form 8379 to get your portion of the tax return back).
Make a Few Decisions on How to Move Forward
It's time to make some decisions about the best way to move forward. Since choosing to go with one tax filing status over another can have both debt repayment and tax implications, you want to make sure you're coming out ahead, overall.
You'll likely want to talk to a financial advisor who has knowledge about both student loan debt and taxes or get free student loan advice through the Institute of Student Loan Advisors. This way, you can receive recommendations for which tax status — married filing jointly, or married filing separately — will make the most financial sense for your household.
If you use an income-driven repayment plan, then after you marry, you'll need to contact your federal student loan service agent to recertify your income with new information.
Far too many couples keep their heads in the sand when it comes to managing debt together. Instead of holding back, start your marriage together with transparency and openness about each other's debts so that you can manage your debts together in the best way possible.