Q. I've recently gotten engaged to the woman of my dreams, but I'm worried about starting off our life together in serious debt. It took me a while to figure out what to do for a career, and as a result of switching programs a few times, I have student loans that are far larger than both our salaries combined. Is there anything I can do about that?
Congratulations on your upcoming wedding. I hope you and your bride to be have a lifetime of happiness ahead of you. That said, be sure that both you and she enter your marriage with your eyes wide open about the state of both your finances. The more honest and forthright you both are with each other before your marriage about money, the better it will be for you both during your marriage.
Both you and your fiancee should share with each other what you're bringing into the marriage financially. The good, the bad, and -- from the sound of your student loan situation -- even the downright ugly. Do it now, before you're married. You'd much rather find out now before you're married whether money troubles could tear you apart than to find out later, when it's much more complicated and costly to split apart.
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Your biggest advantage as newlyweds
Once you share that news with each other, the two of you should start making a plan for how you will address your finances once you're hitched. You didn't mention kids, so I'll assume neither of you are bringing children into the marriage. If that's the case, once you're married, you'll be in the enviable position of being DINKs -- dual income, no kids. If so, you need to recognize that you may very well be nearing the highest point in your life when it comes to available income between the two of you.
After all, should you have children, chances are that either one or both of you will either cut back hours to care for your kids, or a significant part of your joint income will be redirected toward childcare costs. Either way, it means a high likelihood of less available cash if children enter the picture. That means right now may very well be the best time in your life to get aggressive when it comes to tackling your student loan debt.
Why you need to deal with your student loan debt
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In general, loans for us mere mortals come in one of two forms: "secured" or "high interest." If the loan is secured, the lender has the right to take back what you bought with the money should you not make your payments on time and in full. That allows the lender to charge lower interest to take on the risk of lending you the money. Loans that aren't secured, like credit cards, generally charge higher interest, because they can't claw back your assets should you not pay.
It's impossible to take back an education, but student loans are generally available at substantially lower interest rates than unsecured loans. The reason they're available so much more cheaply is that it's incredibly difficult to discharge student loans without paying them off -- even in most bankruptcies. Indeed, even your Social Security benefits can be garnished to pay back student loan debt, making it a debt you'll very likely either need to pay off or take with you to the grave.
How to handle your student loan (and other) debt
The most powerful way to get out of debt is a technique known as the snowball method. It gets its name because, like a snowball rolling down a snow-covered hill, its impact gets bigger the further along the path it gets.
To use the snowball method, line up all your debts in order from the highest interest rate one to the lowest. On all your debts but the highest-interest one, pay the minimum. On that highest-interest one, pay every penny above and beyond the minimum that you can. Once that loan is completely paid off, add every penny you'd been paying toward it to paying off what is now your new highest-interest loan. Keep up that snowball until all your debts are paid off.
Note that if you have a low-interest-rate loan, such as a sub-4% fixed-rate mortgage, on which you can easily afford the payment, you might be OK to keep that loan out of the snowball. Instead, just paying that loan as scheduled after finishing the rest of your snowball would let you start working on your other financial priorities that much more quickly.
If your bride-to-be is also bringing debt into the marriage, you and she should work separate snowballs on your own debts before you get married and then combine efforts once you're married. Here's why: Most spouses are able to give each other gifts of unlimited sizes without tax implications, but if you start paying off each other's debts before you're hitched, it could trigger gift taxes.
If she isn't bringing debt into the marriage, she may want to consider saving up a chunk of cash now that the two of you can use to help accelerate your snowball payment after you tie the knot.
As for consolidating your student loans -- only consider doing that if doing so will significantly lower your interest rate and there aren't big fees involved. Otherwise, all you're really doing by consolidating is pushing deck chairs around, rather than making real progress in eliminating the debt.
Figure out ways to get out of debt more quickly
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With your student loan debt higher than both your salaries combined, it will probably take a few years to get out from under it, but it can be done. To speed things up, you have three tools at your disposal: earning more income, cutting back costs, or selling off things you no longer need. On a somewhat related note, while it may still be considered a bit tacky to ask for money as a wedding gift, chances are decent that you'll get some cash anyway. Any gift cash you receive can go toward your debt snowball.
Getting married gives you a great opportunity to assess what you already have -- and how much of it you really need. As you're combining households and lives, figure out if there are things you each have that you only need one of as a married couple. The extra one could be sold online or at a garage sale, to help free up some cash to put toward the debt repayment.
If you're moving in together for the first time with your marriage, keep an eye toward starting off frugally. Safety comes first, of course, but there's no need to load down your life with the costs of a fancier lifestyle just because your combined income is higher than either of you made individually. Can you make do in a one-bedroom apartment, for instance, instead of feeling obligated to buy a house just because it feels like the "married adult" thing to do?
From an income perspective, can either or both of you pick up some extra shifts at work, or do you have skills that you can leverage in a side hustle of some sort? Every dime you earn from your extra efforts can be put toward your debt snowball and getting yourself out of debt that much more quickly.
It'll be worth it in the end
While there's no magic wand when it comes to paying off your student loans, working your plan aggressively together will go a long way toward assuring your life together starts off on the right foot. With the shared goal and shared determination, you'll probably find the bond between yourselves growing that much closer.
Once those debt service costs are finally vanquished, you'll certainly find the relief that comes from the improved financial flexibility of no longer having them hanging over your head. Should your family be expanding with children, you will certainly value that flexibility as you juggle the higher costs and/or lower income that will bring. And should your family always remain the two of you, just think of how much more you can enjoy your time together with the extra cash you'll have available.
