Don’t pay off your spouse’s student loan without a prenup


The federal government’s decision to forgive $10,000 in student loan debt is good news not only for millions of borrowers, but also for their partners. While student loans taken out before marriage are generally considered separate debts (as long as no one co-signed), couples often tend to one another’s financial baggage in one way or another.

Yet today’s students with credit owe nearly $25,000 by the time they graduate, according to an analysis by the Department of Education. That means there will be plenty of student borrowers whose debt lingers.

A month after my marriage in 2018, an article about personal finance sparked widespread debate. The gist was that a man had helped his new wife pay off an undisclosed amount of “large debts” — including student loans — within two years of saying “I do.” After the debt was settled, the woman filed for divorce. Hot takes flooded social media and I lauded my opinion: Don’t pay off your partner’s debt until you’re married and make sure you get a prenup.

That’s a belief I still hold today.

According to the Pew Research Center, as of 2019, 12% of millennials were single and living together, while 44% were married. Regardless of the level of commitment, unmarried couples — even those living together — should not pay off a partner’s debt directly unless they are the cause of the debt.

This in no way means that an unmarried couple is in a less committed relationship, as there are numerous financial reasons people might want to avoid a marriage license, including the impact on student loan payments. Getting married and filing a joint tax return can significantly affect borrowers with income-contingent repayment plans because their spouse’s income is factored into the calculation of their debt.

The reason for not paying off a partner’s debt is purely practical. Recovering from a breakup is more difficult than dividing up assets and debts in a divorce. The money you gave your partner to pay off debt is usually considered a gift. Aside from taking them to small claims court where you could lose, you’re unlikely to ever get paid back. However, there are other ways for those with more funds to support, such as covering more household expenses so partners with debt can actually increase the amount they spend on loan repayments.

However, paying off debt in a marriage should be a joint venture. You are now a team and your partner’s financial situation is directly affecting you. That doesn’t mean married couples become an amorphous blob of finance. In fact, I advocate the “your, mine, and ours” style of banking, where each person has an individual checking account and a monthly stipend to spend as they see fit. But if you’re looking deep together forever, then it makes sense to consolidate your debt. This is especially true if a partner earns significantly more or is completely debt-free.

Of course, depending on the type of debt, there are nuances here. Student loans that can be repaid through a forgiveness program such as Public Service Loan Forgiveness do not need to be aggressively repaid. A low-rate mortgage is usually a debt not worth fiercely attacking when you could invest the difference.

Back in 2018, the viral article struck a chord because I had also married someone with student loan debt and I was the breadwinner in the relationship. We were on track to repay more than $50,000 before our two year anniversary. We’ve made aggressive repayment a priority and used most of the extra money we made from side hustles to get out of debt. If my husband had come to me with the divorce papers right after that, well, I would have been just like the dumped husband in the article. The difference: We had a marriage contract.

Prenups still have a frustratingly negative reputation when in reality they are just marriage insurance. Insurance for something you hope won’t happen and for which you pay the premium upfront, rather than in monthly installments. If a divorce does occur, you have already drastically reduced the financial consequences. A prenuptial agreement doesn’t mean you expect to get a divorce any more than car insurance doesn’t mean you expect to get into a wreck. It’s a practical step, especially when, as my attorney told me, “everyone has a prenuptial agreement. It’s just your state’s standard laws.”

In the US, each state has its own laws on how assets and liabilities are handled during the dissolution of a marriage. Without a prenuptial agreement, you simply agree to abide by the laws of your state, or ultimately a judge’s decision.

A prenuptial agreement should also not heavily favor one party. Instead, it should create a fair and balanced distribution of your assets and liabilities based on what makes sense in your relationship’s ecosystem. Prenups can also account for what is ultimately a debt repayment vesting schedule. The abandoned husband could have paid off his wife’s debts and then split how much she would have owed him back each year if the marriage had ended quickly.

romantic? No it is not. Practically? Yes indeed. With much of western culture now based around love marriage, nobody really likes to argue that it’s still a contract and probably the biggest financial decision most people will make. You should not sign a business contract without feeling that the terms are fair and just, and the same goes for your marriage. And if you’re already married and haven’t, don’t despair. There is always a postnup.

This column does not necessarily represent the opinion of the editors or of Bloomberg LP and its owners.

Erin Lowry is a Bloomberg Opinion columnist covering personal finance. She is the author of the three-part Broke Millennial series.

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