What Happens to Your Student Loans After You Get Married?
First comes love, then comes marriage, then comes... higher debt payments? If you're engaged and either or both of you have student loans, that could be the reality. According to Student Loan Hero, the average college graduate walked away with over $39,400 in student loans in 2017, and the consequences of entering marriage with such a large financial burden can be substantial. What happens to student loans after you tie the knot? Unfortunately, they don't go away, and, in some cases, your monthly bills could be seriously impacted by your new relationship status. Before tying the knot, here's what you should know about student loans and marriage.
Your monthly payment could go up.
If you have federal loans, you might have signed up for one of four income-driven repayment (IDR) plans. Under these plans, your repayment term is extended and your monthly payment is capped at a percentage of your discretionary income. According to Mark Kantrowitz, publisher and vice president of research with SavingForCollege.com, you could see a monthly payment increase after your wedding depending on the repayment plan you're on. "Some plans, such as the Income-Contingent Repayment plan, have a marriage penalty," said Kantrowitz. "Regardless of how you file your taxes as a couple-jointly or separately-your payments are based on the joint income of the spouses." Because your household income is higher after marriage, you could see a substantial increase in how much you owe each month.
You could lose out on the student loan interest tax deduction.
Under the current tax law, you can deduct the interest you pay on your student loans on your taxes, up to $2,500. However, if you and your spouse earn more than a set amount, you aren't eligible for the tax deduction. "If you were both claiming the deduction at the full amount and get married, you can only deduct $2,500, not $5,000," said Kantrowitz. And, if you decide to file your taxes separately rather than jointly, you don't qualify for the deduction at all. If you're used to getting that deduction, filing your taxes together for the first time could result in a significant loss, affecting how much of a refund you'll get or even what you owe.
You could be responsible for your partner's debt.
Adam Minsky, an attorney specializing in student loan law, said that spousal liability depends on where you live. "In general, only the person who signs the loan contract (along with any co-signer) is legally responsible for repayment of the loan, although state law can vary when it comes to spousal liability," he said. However, if you co-sign a loan for your partner before or after you get married, you have to make sure all payments are made on time. Even if you get divorced, the lender can hold you responsible for the loans. That's why it's so important that you understand the risks before signing your name on a loan application.
No matter what, it's important to learn how to manage your debt.
Getting married is an exciting milestone for you as a couple, but it's important to consider practical concerns, like how to combine your finances as newlyweds and repay your student loans. Before you tie the knot, make sure you know how this next step will affect your personal debt, too. By going over your finances and learning about your options, you can be better prepared to tackle your finances as a team.