Posted by Income Taxes and Bookkeeping LLC

Effect of a Student Loan on Your Marriage

Effect of a Student Loan on Your Marriage

Marriage is a beautiful thing that many people look forward to. It presents a unique opportunity to live together with your heartthrob eventually, and it changes a huge part of your life, including the finances. This, for many people, involves student loans as well. 

Oh, we know that doesn't sound romantic, but it's worth considering the impact of marriage on student loans. Make sure to have the conversation with your future partner on your financial obligation, and come clean with one another on everything, including student loans. 

Getting married involved an agreement to live with the financial impact of your spouse's debt. Sadly, this can have a negative effect on one's ability for future projects and purchases like a mortgage or a car. 

If you are marrying someone with a student loan, here are three compelling areas to bear in mind:

  • Legal responsibility

  • Repayment strategy

  • Available tax breaks 


Legal Responsibility 

A lot of couples wonder whether they will become financially responsible for their couple's student loan. The good news is that you will not have to bear the burden of paying for your spouse's student loan that was incurred before marriage. The federal government holds most of the student loan debt, which can be discharged when there is permanent disability, death of the borrower, or when they cannot repay. 

Should the loan go to default, you will not be responsible for repayment. Also, other debt collection tactics like a wage garnishment or Treasury offset cannot apply to you. Bear in mind; however, that a student loan that goes to default will affect you in other ways. For instance, the credit score of the borrower suffers, which could impact both of you should you intend to buy a house together. 

If any of the parties have a private student loan, make sure you know the terms and conditions. This way, you will know if the debt can be transferred to your partner. Like federal loans, it is possible to discharge a private student loan in death and cases of permanent disability. However, not all private student loans have this clause, which means the liability for the debt can be passed to the spouse or another family member. 


Repayment Strategy 

The method of filing your taxes could make marriage affect how you will repay your student loan. This is true, especially if one of the parties has a student loan placed on an income-driven repayment plan. 

Getting married gives you the option of filing your returns separately or jointly. Filing jointly will bring down your tax bill since the incomes of both parties get combined. 

Joint filing will affect the repayment because the family size and annual income play a significant role in determining if you qualify for a repayment plan. If either party is enrolled in an income-driven repayment plan, the income combination on the tax return will shoot up what you owe every month since what you report is now higher.

On the other hand, you can file separately even though you lose some tax breaks. The silver lining is that it saves you a lot since your income will not be combined. 


Tax breaks You get 

When you are married, the tax breaks you get because you repay your student loan can be affected. In filing federal income tax, one can have a tax deduction for any interest paid on private or federal student loans. This deduction stands at $2,500 per year. 

This deduction is an adjustment to income. As a result, you do not have to itemize your deductions to claim the deduction and bring down your taxable income. The modified adjusted gross income of taxpayers determines their eligibility for this tax benefit. 

For married couples filing jointly, the amount for deduction is still capped at $2,500. However, you and your partner can file separately and take the maximum deductions, resulting in impressive changes in your income taxes.


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