How Marriage Can Affect Your Student Loans
If you or your future spouse went to college, it’s highly likely you will have to deal with student loans. According to the Federal Reserve Bank of St. Louis, 46% of young married couples had student loan debt in 2016, triple the share of couples that had student loans in 1989.
What happens to student loans when you get married depends on when you took out the loans and where you live. But for all borrowers, getting married can impact what payment plans and tax deductions you’re eligible for, and it can even affect your ability to qualify for credit in the future.
7 Common Questions About Student Loans and Marriage
If you’re getting married, you may be worried about how marriage will impact your finances, especially if your future spouse has a significant amount of student loan debt. If that’s the case, here are answers to questions you may have before tying the knot:
1. Does Marriage Impact My Payments If I’m on an Income-driven Repayment Plan?
If you have federal student loans and are enrolled in an income-driven repayment (IDR) plan, getting married can affect your payments.
With an IDR plan, your payments are a percentage of your discretionary income. If both you and your spouse work, your income may be higher, and your payments might increase.
If you file your taxes jointly, all of the IDR plans will use your combined income to determine your payments. If you file your tax returns separately, most of the plans—income-contingent repayment, income-based repayment and Pay As You Earn (PAYE)—will only use your income to calculate your payment amounts.
The one exception is Revised Pay As You Earn (REPAYE). Even if you file your returns separately, REPAYE includes your spouse’s income in its calculation.
2. How Does My Spouse’s Student Loan Debt Affect My Credit?
In general, your spouse’s debt won’t affect your credit unless you co-signed a loan with them. If you co-sign a student loan and your spouse falls behind on the payments, your credit score will be impacted.
Marriage can also affect your ability to get other forms of credit, even if you didn’t co-sign your partner’s loans. When you apply for credit as a couple—such as trying to get a mortgage together—the lender will typically look at your combined income and debt-to-income (DTI) ratio. If your DTI is high, you may not qualify for a loan.
3. Is a Spouse Responsible for Student Loans Incurred After Marriage?
Whether you’re responsible for student loans your spouse took out after you got married is dependent on where you live. In most states, debt taken out during the marriage is the responsibility only of the person who is on the loan agreement. However, if you live in community property states—Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin—you are jointly responsible for the debt.
4. Can Married People Jointly Refinance Their Student Loans?
Student loan refinancing can be a way to streamline your payments, reduce your interest rate and lower your monthly payments. If you both have student loan debt, you may be wondering if you can refinance your loans and consolidate them together to take advantage of your spouse’s higher credit score or income.
Few lenders offer refinancing for married couples. However, most private refinancing lenders allow spouses to co-sign their partner’s loan applications. As a co-signer, you’ll share responsibility for the loan. If you have good credit and steady income, you can help your spouse qualify for a better rate than they’d get by themselves. But as previously mentioned, you will be responsible for payments as a co-signer if your spouse cannot make the payments.
5. Am I Still Eligible for the Student Loan Interest Tax Deduction?
With the student loan interest deduction, you can deduct the lesser of the interest you paid on your student loans for the year or $2,500.
However, there are income limits. If you or your spouse is a high earner, that can push your combined incomes over the eligibility limit for the student loan interest tax deduction.
The deduction is gradually phased out if your modified adjusted gross income (MAGI) is between $70,000 and $85,000 ($140,000 and $170,000 if you’re married and file a joint return). You aren’t eligible for the deduction if your MAGI is $85,000 or higher ($170,000 or more if you file a joint return).
6. Will Getting Married Affect My Financial Aid?
If you are planning on going back to school, your marital status can impact your financial aid eligibility.
If you get married, you’re considered independent for federal financial aid purposes, even if you live with your parents and rely on them for financial support.
As an independent student, the government looks at your combined household income to determine what aid you can receive. If you have a higher income as a couple, you may not qualify for financial aid programs designed for low-income students, such as Pell Grants or subsidized loans. However, you can take advantage of the higher student loan borrowing limits for independent students.
7. Will I Have to Pay My Spouse’s Loans If We Get Divorced?
As a newlywed, the last thing you want to think about is divorce. But it’s wise to understand how debt is handled—through the good times, and bad—just in case.
Loans taken out after you were married are typically considered marital debt and will be split equitably if you divorce. If you live in a community property state, the debt is split in half, and you’ll share responsibility for repaying the loans.
If your spouse took out the loans before you got married, you usually are not on the hook for the debt unless you co-signed the loan. If you co-signed your spouse’s loan, you share responsibility for the debt even after your divorce is finalized.
Repayment Strategies to Help a Partner Pay Off Student Loans
If you and your partner have student loan debt, you can use these strategies to accelerate your repayment:
With the debt avalanche strategy, list all of the loan balances that you and your spouse have and their interest rates. Continue making the required minimum payments on all of them, but dedicate any extra cash you have to the account with the highest interest rate. Once that account is paid off, put the payment toward the loan with the next-highest interest rate.
By targeting the most expensive debt first, you’ll save more money over the repayment term and pay off your debt faster.
Make Extra Payments
If possible, pay more than the minimum required each month. Even small extra payments add up.
Say you had $35,000 in student loans, a 10-year repayment term and a 5% interest rate. With those terms, your payment would be $371 per month. if you increased your payments by $25 per month, you’d save $815 in accrued interest and have your loans paid off 9 months early.
Increase your monthly payments by $50, and you’d save $1,500 and pay off your loans 17 months ahead of schedule.
Student Loan Refinancing
If you have high-interest student loans, you can refinance your loans to lower your interest rate or adjust your repayment term.
However, think twice before refinancing federal student loans. They will become private loans, and you’ll no longer be able to take advantage of federal loan perks like income-driven repayment plans, loan forgiveness or federal forbearance.
If you have federal student loans, your payments are suspended, and your interest is set to 0% until at least September 30, 2021. If you refinance your federal loans, you’ll no longer be eligible for this benefit. You’ll have to start making payments, and interest will accrue on your loan balance.
Loan Repayment Assistance Programs
Depending on where you live and your profession, you may qualify for a loan repayment assistance program. For example:
- California State Loan Repayment Program: Eligible healthcare professionals in California can receive up to $50,000 in exchange for a two-year commitment to work in an approved Health Professional Shortage Area.
- Teach Iowa Scholar Program: Qualified teachers in Iowa can get up to $4,000 per year for up to five years—either to pay off student loans or as a lump-sum cash payment—if they teach in designated shortage areas.
- New Jersey STEM Loan Redemption Program: In New Jersey, workers employed in designated science, technology, engineering and mathematics occupations can qualify for $2,000 of loan repayment assistance per year for up to four years.
Visit your state education agency and your field’s professional association websites to see if there are programs in your area.