When you get married, most (if not all) of your assets and debt are combined because, legally, the two of you are considered one financial entity. There are some things you can choose to keep separate – like student loans – but it can get tricky.
We’ll cover what you need to know about student loans and marriage so you can move forward in your financial journey together with confidence.
How Does My Spouse’s Student Loan Debt Affect My Finances?
Let’s start by saying that your student loan debt before marriage remains your debt unless your spouse co-signed your pre-marriage student loan(s). It isn’t until you take on new student loan debt, become a co-signer or refinance the loans during the marriage that things start changing.
Before you decide how to move forward, ask each other the basics:
- Which one of you has student loans?
- What types of loans are they? Are they federal and/or private?
- What are your loan(s) balances and interest rates?
- How much are the monthly payments? What’s your payment history and payment status on the loan(s)? Are you behind on payments or up to date? Are the loans deferred, etc.?
Once you’ve figured out where the both of you stand and what the both of you are responsible for, it’s important to know how your student loan debt may affect your individual finances.
Here are some ways your finances can be affected:
- You may be responsible for your spouse’s student loan payments if new loans are taken out or existing loans are consolidated or refinanced while you’re married.
- If you co-sign your spouse’s loan, it will show up on your credit report, too. That may affect your ability to qualify for other loans or lines of credit (like a mortgage or credit cards).
- Any loans in your name will have an impact on your credit score and debt-to-income (DTI) ratio. This includes loans where you are a co-signer on your spouse’s loan or when you’ve refinanced your loans with your spouse.
- If your spouse defaults on their loan that you are a co-signer on, creditors and the federal government might garnish your wages or seize your assets to collect what’s owed.
Does Your Monthly Student Loan Payment Change?
When you’re married, your combined income or how you file your taxes could affect your student loan repayment plan.
You can file your taxes jointly or separately. With federal student loans, the Department of Education will:
- Use your joint income when filing together to determine what your monthly payment is if you have an income-driven repayment plan or want to switch to one – which will likely increase your monthly payment.
- Use your individual income to determine your monthly payment if you file separately – unless you have a Revised Pay as You Earn plan, then your joint income will be used.
- Reduce your monthly payments if your spouse also has student loan debt when you file jointly. Your payment will be prorated based on your share of the combined debt.
If you have a federal student loan repayment plan that isn’t income-driven, your student loan payments are fixed, so your payment won’t likely be affected by marriage.
Private student loan repayment plans aren’t based on income, so you likely won’t need to worry about a higher monthly payment (like you might with certain federal loans) if you and your spouse file taxes jointly.
Check all the terms and conditions of your private loan to see if your payment might change with marriage.
What Happens to Your Student Loan Interest Deduction?
If you paid student loan interest in the last year, you may be eligible for a tax deduction of up to $2,500.
If you’re married, you’re not eligible for the tax deduction:
- If you file your taxes as “married filing separately”
- If you file jointly, but someone else can claim you or your spouse as a dependent on their tax return
- If your joint modified adjusted gross income is greater than $170,000 (Even if you file separately, your joint income will be applied toward your taxes for this deduction.)
Should Your Student Loans and Your Spouse Get Hitched?
You may decide to help your spouse pay off their student loans or take over the payments. You can do this by:
- Keeping everything in your spouse’s name, but you cover the payments
- Consolidating or refinancing your combined loans into a single loan under your name
However, there are some cases when you might not be able to refinance or consolidate. The Department of Education won’t consolidate student loans for couples, only individuals. But some private lenders allow couples to refinance their combined loans.
If your spouse is applying for new student loans, consolidating loans or refinancing loans on their own, it may benefit you both if you decide to become a co-signer, effectively agreeing to repay the loan if your spouse can’t.
Becoming a co-signer may:
- Help your spouse qualify for better loan terms if you have a higher credit score or a lower DTI than they do
- Save you money as a couple because a lower interest rate usually means less money paid out over the life of the loan
Just keep in mind that if you become a co-signer, your spouse’s missed payments will affect their credit score – and yours. And if they stop making payments, you’re responsible for repaying the loan.
No matter what you decide to do, it may be a good idea to get a prenuptial agreement (or a postnuptial agreement if you’re already married). These agreements can lay out who is responsible for the repayment of debt acquired during your marriage and hopefully protect you from financial hardship if you divorce.
What Happens With Student Loan Debt in a Divorce?
The debt you acquire during a marriage (even if it’s your personal debt) may be subject to state property laws in a divorce. These laws determine how your assets are split.
Most states use common property law. The law indicates that most of what you acquire on your own during a marriage will be treated as separate property in a divorce. But, depending on what state you live in, you might be responsible for your ex-spouse’s student loan debt post-marriage if the debt was acquired during the marriage.
Keep in mind that if your spouse is a co-signer on your student loan (or vice versa), they’re legally tied to the debt unless you remove them as a co-signer.
Two People, Two Worlds
Marriage is the bringing together of two people and two worlds, and those worlds can include student loan debt. It’s important to have a conversation about where each of you stands with your debt and repayment to figure out how it will affect your finances.
It’s a good idea to review your student loans before you get married, but if you’re already married, it’s never too late to have that conversation with your spouse. No matter which stage you’re at, there are options to help you move forward in your journey together.
IRS. “Topic No. 456 Student Loan Interest Deduction.” Retrieved March 2022 from https://www.irs.gov/taxtopics/tc456
Department of the Treasury Internal Revenue Service. “Tax Benefits for Education.” Retrieved March 2022 from https://www.irs.gov/pub/irs-pdf/p970.pdf