Getting married to a person with student loan debt can present several financial problems. Most important, you may be wondering whether financial institutions can hold you responsible if your spouse defaults on the loan or if your own credit score may start to go down the tubes. The answer to this question changes depending on the actions you take during the marriage.
Debts Before Marriage
Young couples with degrees and advanced degrees may bring moderate to large amounts of debt into the marriage. Fortunately, all debts accumulated before the marriage belong to the spouse who took out the loan. This means a financial institution cannot hold the non-debtor spouse liable for a defaulted loan. Additionally, the non-debtor spouse does not have to worry about any negative credit score implications.
Debts During Marriage
Debts accumulated during the marriage have a greater impact on a spouse and should be of particular concern when marrying someone still in school. While a financial institution may not be able to hold a non-debtor spouse liable for the other spouse's student debt, the financial institution can take jointly owned property to satisfy the debt. For example, suppose your spouse takes out one more student loan during the marriage to complete medical school. If your spouse defaults on the loan down the road, the financial institution can put a lien on your spouse's interest on any property you own together -- your house and family car, for example. A lien makes selling these properties more difficult.
Consolidation can help someone with a student loan get lower interest rates, thereby lowering monthly payments. Married couples can actually consolidate their student loans together but, unfortunately, this may cause both spouses to be liable for each others' student loan debt. For example, suppose one spouse has moderate undergraduate debt while the other spouse has significant professional school debt. The spouse with the moderate debt becomes liable for the larger debt. This means that any failure to pay has negative credit score implications on both spouses.
Co-signing for your spouse's debt can have positive results, such as receiving a lower interest rate. On the other hand, co-signing creates direct liability. In short, a spouse who co-signs on a student loan either before or during the marriage automatically becomes liable for the debt. Co-signing creates the same legal obligations for the co-signer as for the spouse who takes and uses the student loan.
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