Marriage can affect many of your finances, here’s how:

1. Tax Payments

Federal loan borrowers can enroll in one of four income-driven plans.

One of these plans is the Revised Pay As You Earn plan. This plan determines married borrowers’ payments based on their combined income and loan debt regardless of how they pay their taxes, but this typically means a higher monthly payment.

If you choose the Married Pay As You Earn plan, that means that the enrollees choose the tax status “married filing separately” pay based on their individual incomes. However, doing that means missing out on tax breaks joint filers receive.

If you’re unsure of which you should do, ask your tax preparer to check your tax bill for both options.

2. Risk of losing the student loan interest deduction

You can deduct up to $2,500 of student loan interest with the student loan interest deduction. However, if you and your partner together earn more than $160,000, you’ll lose the deduction. You can’t claim it at all if you file separately.

3. Co-signing your spouse’s private loan

If you co-sign your spouse’s private student loan, you’re legally responsible for repaying it if he or she can’t. The loan also appears on both of your credit reports, and it could impact your ability to take on new credit or debt, such as a mortgage.

4. Payments from both

If your partner and you choose to help each other repay your loans, you should consider creating a written agreement outlining the terms. This could help you avoid arguments in the future, and in case of a divorce if one spouse depends on the other for financial help. However, you should remember that the loans will remain ONLY in the borrower’s name, and not your spouse’s.

5. Debt after divorce

Debt you bring into a marriage typically remains your own, but loans taken out while being married can be subject to state property rules in divorce. If one spouse co-signs the other’s private student loan, the spouse is legally bound to the loan until obtaining a co-signer release from the lender.

To avoid post-divorce legal problems over student debt, couples should create a prenuptial or postnuptial agreement. But remember these agreements also have limitations.

Contact us to find out how you can be debt free before you get married!