Saying 'I Do' Could Affect Your Student Debt

Educational loan

For richer, for poorer.

For centuries, couples have said this – or a variation thereof – on their wedding days. However, student loans are one thing prospective spouses haven't been dealing with for centuries, and this subject seems to be giving a lot of them cold feet nowadays.

Wedding season is traditionally the summer; however, the Student Loan Ranger has recently received many questions from borrowers about the relationship between marriage and student loans. Since our sacred vow is to help any way we can, we'll answer a couple of them here.

Note: These are real questions sent to the Student Loan Ranger, though the text has been edited for grammar and clarity.

Q: My son married a young lady with over $200,000 in student loan debt. Yes, you read it correctly. If something were to happen to her, is he responsible for her debt?

A: This is the biggest concern we hear from borrowers. After all, marrying someone means you accept his or her faults and quirks – but it doesn't necessarily mean you want to accept his or her six-digit loan balance as well.

The good news is that all federal student loans have protections in place should something unfortunate happen to the borrower, such as an accident that impairs his or her ability to earn income or results in death. You certainly don't want to have to take advantage of these loan discharges, but it's reassuring to know they're there if you need them.

With private student loans, things get trickier. Many of these do not come with death discharges, and some lenders have come after the borrower's family for payment in the past – though this is not always the case.

Note that in many cases, the amounts discharged due to death or disability is taxed as income, which could cause the borrower or estate to owe funds to the IRS.

Whether a lender comes after you for your spouse's loans will depend on that lender and that loan. In short, this is another good reason to read private loan paperwork thoroughly before signing it. If you want to protect yourself, obtaining life insurance for the borrower that covers his or her debts may make sense for you.

Of course, the advice above applies to any individual debt a spouse might bring into a marriage. Should you cosign a new loan with your husband or wife – for instance, to help him or her return to school – you would be a co-borrower for this debt and responsible were it not repaid.

Q: I'm 62 years old and in December will receive my first Social Security check. I am also receiving a small pension check.

I am considering marrying someone who has a deferment on his student loan, whose principal owed is about $65,000.

I am requiring a prenuptial agreement setting forth that I accept no responsibility of the student loan.

Under those conditions, is it correct to assume that, even if I marry this person, the federal government cannot tap into Social Security and pension benefits paid directly to me?

A: One of the consequences of federal student loan default is the government gaining the ability to garnish your wages and seize any federal payments you receive – including Social Security – to cover what you owe. This penalty could dramatically affect your life as you get older and potentially move to a fixed income, so it's no wonder this borrower is concerned about it.

When a federal student loan defaults, the borrower becomes responsible for paying its full balance immediately. Failing to do so can eventually result in the consequences mentioned above, among others. However, it does not result in the government gaining the right to go after a borrower's spouse for the amount the borrower owes.

You would have to live with the default in other ways. For instance, if you wish to buy a house with your husband or wife, you may not be able to apply for the loan together, due to the damage a default causes to credit score. They could garnish your spouse's income and tax refund, which could affect you financially as well. You may also experience the collection calls and general stress of the situation, courtesy of your spouse.

Ultimately, your best bet may be to talk about your Educational loan with your spouse before you tie the knot to know what you're getting into. After all, communication is key to a successful marriage – whether you're richer or poorer.

Source: (https://educationloansinindia.wordpress.com/2015/12/26/saying-i-do-could-affect-your-student-debt/)