Should Your Partner Help Pay Off Your Student Loans?
The vast majority of college students today graduate with a substantial chunk of debt. Many rack up additional student loans in graduate school.
And the original amount can grow dramatically in size over time as interest accrues, which is one reason why Americans now hold over $1.6 trillion in student loan balances combined.
The widespread burden of student debt means it’s an issue that’s likely to come up in many relationships.
One survey found that 27% of millennials would seriously consider the amount of student loan debt a potential partner had before committing to a long-term relationship. Another survey found that 50% of participants consider credit card debt a red flag when it comes to dating.
If you have a high amount of debt, it makes sense to ask, “Can someone pay my student loans?” There’s no one answer to the question of whether your partner should help with loan payoff.
It can be a smart choice for some, but there are also important risks involved. Whatever you opt for, it’s not a decision to be taken lightly, given that money is the most common source of stress in relationships.
Here’s a few things you may want to consider as a couple when deciding whether paying off your student loans should be a joint endeavor:
The Advantages of Having a Partner Pitch In
There could be several reasons that tackling your student loans as a couple may be an attractive proposition.
One advantage of a situation in which a husband or wife pays off debt for the other is that you could formulate a mutual plan to pay the loan off faster by working together. Loan balances can grow astronomically as interest adds up (you can use this student loan calculator to get an idea of how it works).
For example, say you originally graduated with $50,000 in student debt at a fixed interest rate of 6%. If your loan term is 10 years and you make just the scheduled payments over that time, which would be approximately $555.10 per month, with no additional principal paid, you’d end up paying $66,612 by the time you’re done. Approximately $16,612 of that would be interest.
If your partner can help you pay more each month this could help reduce the principal balance of the loan. This in turn can help reduce both the amount of time it takes to repay the loan, and also the amount of interest that accrues over the life of the loan. Continuing with the example above, say your partner could contribute an additional $100 per month to help pay off your student loan debt. With an additional $100 per month, it’s estimated that repayment could take about 96 months instead of 120 and interest will accrue to just under $13,000 instead of $16,600.
If you and your partner are in a serious relationship, it could make sense to take a team approach to finances, from budgeting to saving for a home or vacation to investing for retirement. Every additional dollar that you spend on student loans is one less dollar available in your monthly cash flow.
If you were to save or invest that dollar, it could have the chance to grow over time thanks to compound interest and favorable market returns.
Working in tandem to reduce and eventually eliminate debt means you might better be able to achieve your dreams together. So even though your student loans are your own, tackling them together could make good financial sense in the long term.
Another reason some couples choose to attack loans together is out of a sense of fairness and commitment. When you commit to marriage or a long-term partnership, you jointly choose a lifestyle together.
When one partner is spending a big chunk of income on loan payments, he or she has less left over to spend on things like restaurants, trips, or housing. That can feel like an uneven burden if remaining expenses are split 50/50, especially if the partner with debt also makes less money.
Beyond fairness, some couples can see combining finances as a symbol of their emotional commitment. That could mean opening things like joint accounts and credit cards, buying a home together, and saving for life goals.
But many understand that it also means accepting a partner’s debts along with the assets and tackling the challenge, just like any other, as a team. A partner’s offer to help with loans could be a way of expressing love and support and deepening the couple’s bond.
Should You Think Twice Before Having a Partner Pay Your Loans?
While having a partner help pay your loans has its benefits, it’s not always the best course of action. For one thing, it can be hard to figure out what to do if the relationship ends.
Would your partner then demand that you pay back the investment, or would you feel obligated to do so? This type of situation could create an acute financial burden or lasting animosity.
Even if you don’t break up, having a significant other contributing to your loans can create friction in a relationship. The person who is spending money for a degree he or she didn’t earn might bring up feelings of resentment, especially if they made the concerted decision not to take on their own educational debt.
Although it’s not common, there’s a chance that your partner can use the contributions as a way to guilt trip you or pressure you to make certain decisions.
On the flip side, you could start feeling guilty for relying on your significant other in this way. While these situations are not true of every couple, it is something you might want to keep in mind.
There are also practical risks in having your partner pay bills in your name. Remember, the loan is in your name, so agreements or repayment plans you made with your partner aren’t officially reflected with the lender. If you are relying on someone else to make the required minimum monthly payments on your loans, any late or missed payments would be reflected in your credit history.
If your partner tends to be irresponsible with money or forget to pay bills, you might want to follow up and be sure the bill is paid on time each month or think twice before counting on them for your monthly payments.
If your partner was added as a cosigner on your student loan, however, then your partner will also be responsible for loan repayment and would likely also be impacted by late payments.
Things to Keep in Mind
You may be wondering, Is a spouse responsible for student loan debt if you aren’t able to pay it? The answer is—that depends. If your husband or wife is a cosigner on the loan, he or she is equally responsible for the full amount.
So if you stop making payments, your spouse is on the hook as well. If you took out your loan before you got married, then your spouse isn’t required to pay it during the marriage or if you get divorced. However, if you took out the loan while you were already married, judges in some states can hold your partner responsible if you default.
If you decide to move forward with joint repayment, a good starting point could be open and honest communication about your plans. One idea is to come up with a written and signed agreement outlining the terms and responsibilities of each partner.
That could help you make sure that you’re on the same page and avoid future squabbles. If you want to go the extra mile, you could have a lawyer draw up the agreement so that it becomes official. Then it could come in handy if you end up figuring the dispute out in court.
When to Consider Student Loan Refinancing
Whether or not your partner is pitching in to help you with repaying your student loans, there are steps you can take as an individual to help streamline your student loan repayment. One option that could be worth considering is student loan refinancing.
Refinancing your student loans can be an effective way to help you reduce your educational debt burden. When refinancing a loan, the loan would generally remain in your name, but you could choose to add your partner as a cosigner on the loan. This could potentially help secure a more competitive interest rate, but would also mean that your partner is officially on the line for the debt.
You can refinance federal or private loans, or a mix of both, with many traditional and private lenders, including SoFi. The lender will review your personal details, such as credit, and employment history if you decide to apply for refinancing. When applying for a loan with a cosigner, their credit history will also generally be reviewed to inform the rate and terms for the loan.
You may be eligible for more favorable terms on new financing such as a lower interest rate than you’re currently paying, or you may be looking for a longer term that could result in lower monthly payments.
When you refinance with SoFi, you won’t pay any fees for filing an application or refinancing, and no prepayment penalties apply just in case you’re able to pay the loan off faster than expected.
It takes just two minutes to get pre-qualified online. Reducing how much you owe on your loans is generally considered to be a smart move, whether or not you’re flying solo.
Whether you’re going it alone or making a team effort, see if refinancing your student loans with SoFi can save you money.
SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.
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