It’s a very common scenario. Girl meets boy, they fall in love, and decide to get married. They’re excited about starting their new life together, but they’re also weighed down by student loan debt — a lot of student loan debt. As they drag that heavy ball and chain into the future, what steps can they take to tilt the odds of marital and financial success in their favor? If that’s your situation, read on.
1. Understand the details
Good communication is essential to the success of any relationship, and while money can be a tough topic, you’ll get your marriage off to a great start by getting accustomed to talking about your finances. You might as well dive right in and start with your debt.
No matter which one of you is bringing debt into the marriage, both of you should know exactly how much debt. You should also be clear about the interest rate, the monthly payment amount, and how long those payments will continue.
That will help you to both manage your expectations about when you might be able to buy a house, how much you can spend on vacations, and all the rest. (See also: The 7 Worst Money Mistakes Married People Make)
2. Be one in debt
Marriage is about oneness, unity, and teamwork. You’re not becoming roommates; you’re becoming husband and wife. So, if one of you was wealthy and the other was not before getting married, after you get married, both of you will be wealthy. By the same token, before marriage, if one of you had debt and the other did not, once you’re married, both of you will have debt.
When my friends Scott and Karen Coy got married, Karen had more than $50,000 of nonmortgage debt. Scott jokingly referred to it as “a reverse dowry.” After getting married, Karen often expressed how bad she felt about “my debt.” But from day one, Scott would correct her, saying it was “our debt.”
It took them six-and-a-half years to become debt-free. All that time, they rented even though they would have preferred to buy a house. It took great patience and perseverance.
Karen says she will always remember the day they made their last payment. It was as if a huge weight had been lifted from their shoulders. And looking back, she says the way they navigated the journey — together — created an inseparable bond in their marriage.
3. Consider being two in taxes
If you were using an income-based repayment plan before getting married, how you file your taxes after you get married will matter greatly. If you file jointly, your payment amount may go up. That’s because income-based repayment plans require you to “recertify” each year by submitting your income tax returns to your loan servicer, who will now make decisions based on your joint income. So, you may want to consider filing separately, in which case most student loan plans will use just the borrower’s income as the basis for recertification.
However, filing separately may make you ineligible for certain tax credits, so proceed with caution. It would be best to consult with an accountant or run some what-if scenarios with tax-planning software.
4. Figure out the implications for your budget
Before deciding where you’ll live after you get married, create a post-marriage cash flow plan. What works best is to fill in your financial commitments first. How much of your joint income will you save and invest? How much will you give to charity? And how much will you need to devote to debt repayment?
Then you can see how much you can afford for rent or a mortgage. I usually recommend committing no more than 25 percent of monthly gross income to the combination of your mortgage, property taxes, and homeowners’ insurance. If you rent, devote no more than 25 percent to your rent and renters’ insurance.
A student loan payment, however, changes the math. I recommend that the combination of your housing and your student loans together make up no more than 25 percent of your monthly gross income. So, you should figure out what percentage of your monthly gross income your loan payment amounts to and subtract that from 25 percent. The answer is the percentage of gross income you could devote to housing while you have student loans.
If your student loans amount to an especially large percentage of your gross income, that may end up being overly restrictive. So, you’ll have to adjust other spending categories downward, such as entertainment, clothing, or vacations. (See also: 3 Simple Ways to Split Bills With Your Spouse)
5. Prioritize early payoff
The early years of your marriage present a great opportunity to speed up the process of getting out of debt. If you want to have kids one day, your pre-kid days will be the most financially flexible time you may ever experience. Make the most of it by making extra payments on your loans.
Debt can be a roadblock in the pursuit of financial goals such as buying a home, and it can be a hindrance to a happy marriage. So, consider building your lifestyle on just one income and putting most of the other paycheck toward your student loans. By living an especially frugal life in the early years of your marriage, you’ll be setting yourselves up for long-term success. (See also: 7 Ways Paying Off Student Loans Early Can Boost Your Finances)