Total student debt in the US today is somewhere around one trillion dollars. Chances are if you have a significant other, he or she probably owns some of that debt. You may be wondering, “If we get married, will I be on the hook for my spouse’s debt too?”
The most likely answer is no, you are not responsible for that debt. But there are some factors to consider:
Is it my debt?
It depends on whether or not you co-signed your spouse’s loan paperwork. If you did sign, it should come as no surprise that you are responsible for those loans. Most likely thoughIf not, your spouse (or you) probably obtained that loan before marriage. In that situation, you are not responsible for your spouse’s loans.
Of course, once you do get married, this debt will be part of your life one way or the other. According to U.S. News, there are some “money talks” you should have before marriage that could help. These are all the more important if one (or both) of you has some serious school debt. In no particular order, those money talks should include:
- Your credit histories
- Whether you want separate or joint accounts
- Your long-term financial goals
- Your spending styles
- Who will do what?
- How will you respond to needy family members?
Keep in mind that whether or not you’re legally responsible as for your spouse’s debt as an individual, things change when you get married. Unless you keep your finances completely separate, you’ll probably end up helping to pay off these debts simply because you care about your spouse.
Will our combined incomes affect my income-based repayment rate (IBR)?
Federal student loans are eligible for Income-Based Repayment (meaning your repayment rate is based on your current income). You may be concerned that your monthly repayment rate will go up once both you and your spouse’s salaries are factored together. This will only happen if you and your spouse file a joint federal income tax return. In the event you do, (and both of you have IBR-eligible loans) the Standard Repayment Plan is determined based on the combined amount of both your IBR-eligible loans. If this amount is higher then what you and your spouse would be required to pay under IBR, you two are considered to have a partial financial hardship. Check the IBR page on finaid.org for more information.
However, Congress corrected this “marriage penalty” (P.L. 110-153, December 21, 2007). You now have the option to file as “married filing separately” and therefore only count your adjusted gross income and student loan debt. This allows the borrower to exclude their spouse’s income when calculating monthly payments.
Two things to keep in mind:
- This could be an issue in some states where community property is treated differently. I recommend doing some research for yourself, if you think you might like to file separately.
- You may loose some marriage tax benefits by filing separately. Keep this in mind when making your decision.
Can creditors seek payment from me if it’s not my debt?
Like most legal or financial issues, things are not quite as cut-and-dry as we would like. According to one financial advice column, there are some factors that might affect the debt-free spouse potentially resulting in creditors going after that spouse. They are:
- Adding your name to your spouse’s credit cards/loans thereby linking your credit history
- Refinancing a mortgage in both spouses’ names
- Consolidating a student loan with your spouse
- If the borrowing spouse defaults on the loan and you have signed on other loans
- If the spouse who borrows dies (affects the amount you receive from your spouse’s estate)
- If you and your spouse divorce (only comes into play in certain states and is up to the judge’s discretion)
These are some of the potential issues when marrying a partner with student debt. To reiterate, if you or your spouse accrued the loans before marriage, you most likely will never be held responsible for those loans. However, there are some payment options and other factors to consider.
If you’re thinking about getting married, it’s a good idea to talk through these issues with your spouse and set expectations. Writing a prenup is one good way to get everything out in the open. However you do it, finances shouldn’t get in the way of being with the one you love, but it’s important to plan ahead and to do your research so you’re ready for this life-long commitment.