Getting married can change many aspects of your life, including your personal finances. For many couples, student loan debt is an important part of that. It might not sound romantic, but it is worth understanding before the big day how marriage can affect student loan repayment.
If you have not had a conversation with your future spouse about your financial obligations, now is the time to do it. It’s essential to be transparent with each other about any debt you have before you say “I do,” including student loans.
When you get married, you agree to live with the financial repercussions of your partner’s debt, which can affect your ability to finance future purchases like a car or a home. Here are three areas that often come to mind when considering how getting married can have an impact on student loans:
— Legal responsibility
— Repayment strategy
— Available tax breaks
One of the most common questions that couples have is whether they will become legally responsible for their partner’s student loan debt once they get married. This is often a big concern when one partner in a marriage has a lot of student debt.
The good news is that the legal responsibility to repay student loan debt taken out before the marriage is unlikely to be passed along to a spouse. The vast majority of student loans are held by the federal government, and these federal student loans can be discharged in the event of death or in cases of total and permanent disability where the borrower is unable to repay.
Likewise, you will not be responsible for repaying a federal student loan if your partner fails to pay that loan and it goes into default, or vice versa. You cannot become subject to wage garnishment or Treasury offsets for your spouse’s debt. However, a student loan default will result in damage to that person’s credit score, so it’s important to know that it could affect you in other ways, like if you wish to buy a home together.
If either of you has private student loans, you should double-check the terms and conditions to be certain about whether the debt could be passed along to the spouse. Private student loans frequently can be discharged in death and many times in cases of total and permanent disability. However, some private student loan promissory notes may not have this clause and the responsibility for these loans can be passed along to a spouse or other family member, so it’s important to read the fine print on these contracts to understand your obligations.
If either of you has any student loan debt that is not dischargeable, each should consider protecting the other partner by obtaining life insurance for the borrower that covers his or her student loan debts.
Depending on how you file your taxes, marriage may affect your student loan repayment strategy, particularly if at least one spouse has federal student loans that are being repaid on an income-driven repayment plan.
When you get married, you have the option to file federal income taxes jointly or separately. While filing jointly can reduce your tax bill, it combines the income of both partners.
Filing jointly can have an impact on student loan repayment because your annual income and family size are used to determine eligibility for income-driven repayment plans and to calculate your monthly payment amount. If either of you is enrolled in an income-driven repayment plan, combining your income on your federal tax return can significantly increase the amount owed each month because you will need to report this combined, higher income to your student loan servicer when you recertify your repayment plan.
Filing taxes as “married filing separately” may disqualify you from certain tax benefits, but it could save you money in the long term as a student loan borrower since it would not combine your income.
Available Tax Breaks
Getting married can also affect the tax break that you receive for repaying your student loans. When you file your federal income taxes, you can take a tax deduction for the interest paid on federal or private student loans. For all eligible filers, this deduction is capped at $2,500 a year.
The student loan interest deduction is claimed as an adjustment to income. This means you can claim this deduction to lower your taxable income even if you don’t itemize deductions. Tax filers who are repaying student loan debt are able to claim this tax benefit depending on their modified adjusted gross income.
If you file jointly as a married couple, you can still only deduct up to $2,500 total in student loan interest paid. However, if you and your partner file your taxes separately and you both take the maximum deduction, this could be a significant change on your income taxes.
That said, there are other benefits and tax deductions that come with filing jointly, so it’s worth considering whether you will maximize tax deductions and save money overall by filing jointly or separately.
It can be tricky to navigate tax filing as a newly married couple, particularly when it comes to determining which is the best option for you. If possible, consult a tax professional and discuss student loan repayment. Understanding how marriage can affect your student loans and being transparent with your partner about your debts is a good step toward a financially healthy marriage.
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