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5 Things You Should Know Before Getting Married with Student Loans


Blog Author ProfilePeppyWallet Editorial Team
Posted on August 19, 2019
PeppyWallet aims to help you make the best financial decisions when it's time to make them. In order to help maintain our platform and services, some or all of the products featured in this post are from our Product Partners. Our opinions however, are our own, and featuring specific products does not influence our analysis.
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Editorial Note: This content is neither commissioned nor provided by any financial institution. Any analyses, reviews, opinions, or recommendations that are expressed in this article are those of the author's alone, and may not have been approved, endorsed or reviewed by the financial institution(s) mentioned in this post.

If you have student loans, either federal or private, getting married to someone could have a big effect on your financial circumstances as well as your future spouse's financial situation.

When you have a wedding to plan, it can certainly feel like there's more than a million things to plan out beforehand, and bringing up the uncomfortable topic of personal debt is probably not something either of you are excited to do, especially if it concerns individual student loans. However, if your potential spouse or you have any form of student loans, it's better to have this sensitive conversation sooner rather than later.

When you get married to someone and you begin jointly reporting income, this can affect any income-based repayment or distress benefits you can gain from federal student loans. Material changes to your tax status can in turn affect whether or not you can qualify for certain tax breaks.

Additionally, if you or your potential spouse have a good amount of student loan debt, it's important to sit down and have a conversation as to how this can affect spending habits and budgets and get an understanding as to whether or not taking out that new mortgage for your dream home is feasible. You don't want to be caught off guard if you didn't know that your spouse has a good amount of student loan debt.

You could also benefit from being married to someone with better credit and income history than you, as you could potentially bring up the conversation of having them added as a co-signer in the future if you decide to refinance your student loans.

If your joint household income also goes up, and is likely that it in fact does, this could put you in a favorable spot to start repaying your student loans faster. Being able to afford higher payments due to that stronger income can really help out in the long run.

We've outlined several key things that could change after you get married if you or your potential spouse have student loans.

You could both miss out on helpful tax breaks

If you and your spouse opt-in to file your taxes individually, there's a good chance you can both lose out on a wide amount of deductions and valuable tax credits that joint filers are eligible for. Even if you can file separately and you have a lower payment, it may possibly not be worth to not file jointly. Key benefits that you and your spouse could miss out on include the American Opportunity Credit and Lifetime Learning Credit for higher education expenses, earned income tax credit, student loan interest deduction, the child and dependent care tax credit and even the adoption tax credit.

It's important to understand that whether to file jointly or separately is a decision you will have to make with your spouse, since it will depend on your unique financial situation. You will both need to find a solid balance between possibly having to pay higher student loan payments and any benefits you can qualify for from valuable tax breaks and credits you receive by filing together.

It's a good idea to sit down with your potential spouse and to gather all relevant student loan data to see how your monthly payments could change, and under a wide variety of different income situations.

Getting married could cause your payments to increase or even decrease

If you or your potential spouse have federal student loans which offer income-based repayment benefits, your monthly student loan payments will be adjusted to reflect your new income for the upcoming tax year after you tie the knot.

If you decide to file your taxes jointly after getting married, your monthly student loan payments will be now measured off of your adjusted gross income (AGI). This means if your AGI increases, your monthly student loan payments will typically increase in tandem.

In certain situations, if your new spouse also has student debt and decides to file your taxes jointly, it's possible that both of you could see your monthly student loan payments drop in order to reflect the new household student loan debt, even if your aggregate income is higher.

Another key piece of information to understand is that based on your specific income-based repayment plan, you can file separate federal income tax returns or joint returns. For federal Revised Pay As You Earn (REPAYE) programs, your payments are based on your AGI and aggregate student loan debt, even if you file separately. For Income-Based Repayment (IBR), Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE), your payment is based only on your individual income if you plan to file your taxes separately and not jointly.

If you are considering getting married while in graduate school, and still haven't exhausted all your federal student loan options, you could consider taking out a subsidized direct federal loan so the government can help you and your spouse not have to pay interest when in school or during your grace period.

Budgeting could become more difficult

Getting married to someone can be a challenge since you'll both have to adapt to a different lifestyle. Having debt to worry about can make your new relationship even more challenging to maintain, especially if you may have setbacks that could prevent you from knocking out financial goals that you've been dreaming about for a long time.

Your emergency fund doesn't have to be bigger

Most personal finance experts agree that saving 6 months worth of your expenses is ideal for emergency situations. Ideally, the more you have in savings for emergency situations, the better.

If you're married and your spouse has a steady source of income, the probability that both you and your spouse get laid off is much smaller than the chances of each of you independently being forced to look for a new job, so you don't have the need for a larger emergency fund. If your spouse loses their source of income, you'll still be able to provide for them while they are interviewing for other jobs, and vice versa.

So even if you or your spouse have sizable student loan balances, you can both maintain a smaller emergency fund, but should still be able to cover expenses for at least half a year in a worst-case scenario.

In the case of a divorce, student loan ownership could be affected

The situation can get tricky if one of you decides to file for divorce, as divorce rules vary by state. For example, divorce law in California will be different than divorce law in Missouri.

Lenders won't really care how the student loans are handled during the divorce case. It could be the case that after the terms of the divorce have been settled, the husband could keep the car while he is also responsible for paying off one of the wife's student loans. The wife is still obligated from a contractual standpoint to pay off her student loan, so if the husband doesn't make a payment, the wife's credit score could potentially take a hit due to the missed payments, in which case the wife could sue the husband.

If a couple goes through a divorce, the student loan responsibilities could be swapped around but none of the debt obligations would be forgiven.



Here are some of the best refinance lenders


Lender
Variable APR
Earnest
2.14-6.79%1
CommonBond
2.41-7.95%2
LendKey
2.24-6.67%3

1Important Disclosures for Earnest

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 3.45% APR (with Auto Pay) to 7.49% APR (with Auto Pay). Variable rate loan rates range from 2.14% APR (with Auto Pay) to 6.79% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of September 5, 2019, and are subject to change based on market conditions and borrower eligibility.

Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.

The information provided on this page is updated as of 08/15/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at hello@earnest.com, or call 888-601-2801 for more information on our student loan refinance product.

© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.

2Important Disclosures for CommonBond

Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.37% effective July 10, 2019.

3Important Disclosures for LendKey

Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any education institution.


The team members at PeppyWallet pride themselves in finding and suggesting services and products that they believe are of high quality and have the potential to positively change a student loan borrower's financial circumstances. We may earn an advertising fee or sales commission when we recommend various services and products to you, which is how we maintain our site and education platform. Be sure to read the fine print to help you understand your product's or service's terms and conditions. PeppyWallet is not an investment advisor or lender, and is not involved in the investment or loan approval process, and does not make investment related or credit decisions. Any terms and rates which are listed on our website are our latest estimates but are subject to change at any time, and we cannot guarantee that they are up-to-date.