husband's student loan

Should You Take Responsibility for Your Spouse’s Student Loan?

A reader of AskTheMoneyCoach.com recently wrote me dealing with a dilemma concerning her husband’s student loans.

It turns out that the man had $150,000 in student loans that she only found out about post-marriage. The couple just got married a few months ago.  Together, they make less than $50,000 annually. He earns $17,000 a year.

Here is a condensed version of her questions, along with my detailed answer:

Q: I’m worried about the astronomical interest rate for student loans, and whether I can pay my husband’s $150,000 in student loans.

We qualify for income-based repayments, but if we do income adjusted payments, I would want to file our taxes separately (so that they don’t take my income into as much consideration). Are there any rules for this?

Also, I am pretty good with finances, but I find the whole process of student loans extremely confusing.

Every time I try to reach out to someone to help walk me through the process (either of putting together what’s necessary for income reduction or whatever), I get nowhere.

Are there any people who will actually help you, you know, one-on-one, with determining a plan to pay off your specific student loans? Or are we just supposed to fend for ourselves?

Finally, how do you find out if there is a maximum you can pay per month on your student loans?

A: Your husband should definitely opt for an income-based repayment on his student loans. You didn’t say whether he has federal or private student loans, but I’m guessing the loans are a mixture of the two.

He can do income-based repayment on his federal loans and interest rates on federal student loans really aren’t astronomical right now – 6.8% or less. So I wouldn’t worry about that.

Depending on when he got the loans, if some of them were 2010 or later, he can even qualify to pay the loans for 20 years and then have the rest of the remaining loan balance outstanding forgiven.

The 20-year time frame applies to loans taken out more recently, under the federal student loan reform bill signed by President Barack Obama. For loans prior to 2010, you’re correct that your husband will have to pay those off over a 25-year time frame.

Regarding your taxes, there may be many reasons to file a separate tax return from your husband, but this student loan situation isn’t one of them.

If he seeks an income based repayment plan from his lenders, they are not going to ask him for his tax returns.

And even if they do, it’s now September 2012, so all he will have are his 2011 taxes. You said you two just got married a few months ago, so you won’t even be able to file your 2012 tax return (either jointly or separately) until early 2013.

Additionally, student loan creditors don’t usually ask about household income; they ask about personal income. They may ask for his pay stubs, etc. to prove/verify his income.

As an aside, but a very important one, it seems to be that you have a lot of fears (conscious or subconscious) about your husband’s fiscal habits. And based on what I’ve read, your worries are likely justified.

Your husband, unfortunately, doesn’t appear to be a good money manager (as evidenced by the fact that you had to use your savings to pay both his credit card bills and his line of credit).

Additionally, since his income is pretty low ($17,000), he’s not able to make his $1,200 a month student loan payment, but he doesn’t appear to have taken the initiative to find out how to fix that problem.

I’m a bit concerned that you’ve “taken over” responsibility for this process. As married people, of course we all want to help our spouses – financially and otherwise.

But you seem to have taken an enormous amount of personal ownership of this matter, and he seems to have completely abdicated responsibility.

In the subject line of your question/email to me you even said “I am not sure if I can afford my husband’s student loans.” Why do you have to be the one to afford these loans? Why not him? You didn’t even say “we” can’t afford these loans.

Even though you are the primary bread-winner and you are the one who is handling the family budget, you are not legally or morally responsible for this debt.

And filing taxes together wouldn’t make you responsible for his student loans either. (If however, he defaults on his student loans and you’ve filed a joint return, the federal government or a private lender may be able to seize a federal income tax check that was intended for both of you. So be careful there).

Lastly, it’s also disturbing to hear that you apparently didn’t even know about these massive student loans until very recently. That’s a big red flag.

Work hard to stay on the same page financially with your hubby and to communicate openly and honestly about your respective situations.

Otherwise, your marriage will be plagued by money arguments, financial frustrations and other problems.

And to answer your final questions: I don’t know of any agencies, companies or groups that provide one-on-one counseling or help for student loans.

However, the U.S. Department of Education can be very helpful for telling you specifics about any federal loans your husband owes. And Loan Cancellation and Discharge Forms can be found on the Department of Education’s web site.

Additionally, the single best resource I know of to calculate your loan repayment options under various terms is FinAid.org.

The FinAid site has many loan calculators that allow you to run “what if” scenarios – such as what payments would be in you paid student loans based on 15% of your available income vs. 10% of your income.

I hope this info helps … and good luck to you and your husband!

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