Millions of Americans today owe money in student debt form. And for some people, those payments are an extreme burden.
In some cases, being married could have an impact on your student loans in terms of your monthly payments, related tax benefits, and liability. So it's really important to be aware of the following.
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1. Your monthly loan payments might change once you get married
Some people who take out federal student loans opt out of the standard repayment plan, which has them debt-free in 10 years. Instead, they move to an income-driven repayment plan.
But if you're on one of these plans and get married, your spouse's income might factor into the mix if you file a joint tax return. That could, in turn, result in a higher monthly student loan payment.
If you owe money in student loan form, it could be a good idea to sit down with an accountant and discuss your tax situation. You may be advised to file a separate tax return from your spouse, depending on your circumstances. If you and your spouse file separate tax returns, their income may be excluded when calculating your monthly payments under an income-based repayment plan.
2. You may no longer qualify for the student loan interest deduction
People who are in the process of paying off student loans can deduct up to $2,500 in loan interest annually. However, there are income limits that change each year that determine whether you're eligible for this deduction.
This year, for example, you can't claim a student loan interest deduction with a modified adjusted gross income above $185,000 if you'll be filing a joint tax return. As a single filer, the limit is $90,000.
The nice thing about these rules is that there's no marriage penalty regarding income limits. The income limits for couples filing a joint return are actually more than double the limits for single tax filers. But it's important to be mindful of the fact that you might lose your student loan interest deduction if you're submitting a joint return.
3. You may or may not be liable for your spouse's student loans
Generally speaking, if you or your spouse took out student loans prior to your marriage, only the person who took out the loans will be financially responsible for paying them off. You don't automatically assume each other's debts upon tying the knot. And in most states, loans taken out following your marriage will also be solely the responsibility of the person who takes out the loan if there's just one name on those loan documents.
But if you live in a community property state, the rules are different. In that case, you may be responsible for student loans taken out by your spouse after your marriage became official, and vice versa.
Being married can do a lot of good things for your finances. But in the context of repaying student loans, it could complicate things a fair amount. Make sure you understand the rules involved so there are no unwanted financial surprises.
