Step 1 – Understand their student loan debt. Before the wedding, sit down and talk to your partner to determine how much you both owe in debt, including student loans. Ideally, you’ll identify the loan balance, interest rate, the minimum monthly payment, and the type of loans (federal or private). You can find federal student loan information on the Federal Student Aid website, studentaid.gov. Private student loans can be found by checking billing statements or pulling an annual credit report.
Step 2 – Understand how their debt impacts your future. Although marriage doesn’t make you responsible for your spouse’s student loan debt, their loans can slow progress towards financial goals. Every dollar spent repaying their debt is less money going to vacations, retirement, home buying, or starting a family.
And if you live in a community property state — Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin — you could become responsible for your spouse’s debt if they borrow a new loan or refinance existing student loan debt. This is why it makes sense to get a prenuptial agreement to stipulate who will be responsible for debts incurred during the marriage should you later divorce. Although a prenup may blunt the romance, it can protect you and your spouse from personal finance ruin.
Step 3 – Create a plan to pay off the loans. I typically advise borrowers to tackle their private student loans first rather than starting with the loan that has the highest interest rate. Private loans usually have less flexible repayment options and higher interest rates than federal student loans. Depending on the amount of your partner’s debt, those lack of repayment options can make it difficult to fall below the debt-to-income ratio guidelines for a home loan. You can click here to learn more about FHA Student Loan Guidelines.
Learn More: How to Payoff Student Loan Debt
Step 4 – Explore refinancing options. If your spouse has a good credit score and enough income to cover living expenses and their credit card debt, explore student loan refinancing. They may qualify for a lower interest rate that makes paying off student loans faster and cheaper. You can use Credible.com to explore the best student loan refinance rates with multiple lenders at once.
Two things to note about refinancing. First, refinancing federal loans with a private lender causes your spouse to lose federal benefits like income-based repayment and loan forgiveness programs.
Second, if your future spouse needs you to cosign the loan so they can refinance, make sure you understand your rights as a co-signer and the impact it can have on your credit. Cosigning makes you responsible for your partner’s student loan debt — even if you later divorce. Plus, any payments they miss will show as negative marks on your credit report, lowering your credit score in the process.