Marriage and Student Loan Debt

January 17, 2019

Ever been on a date where the other person doesn’t stop talking about their ex? If you’ve had this experience, you can likely relate it to discussing your student loan debt in your relationship. Talking about finances is a necessary evil in a marriage. It can be difficult to discuss finances in a marriage because many people handle finances different based on their personal experiences and how their parents handled them. You might be great at adulting, but if your parents were never open about managing money, you’re probably unsure of how to bring it up. You might even be unsure as to where to start when it comes to managing finances together. Student loans are a big part of many couples’ financial reality. Figuring out how marriage will affect your student loans is an important part of managing your money together. Here are some main points that we think you should know about marriage and student loan debt.

Honesty

The fastest way to create a rift and cause problems in your relationship is to hide information about your finances. According to C reditCards.com, 6% of Americans in a relationship have hidden credit cards or checking/savings accounts from their partner. That total adds up to about 7 million, for perspective, that’s the size of the state of Massachusetts. It’s not uncommon especially in younger people ages 18-29 to withhold some financial information. It’s when a partner begins to lie about large purchases that a partner should become concerned.

People might think that love solves everything, but it’s better to be on the same page and realistic about the situation. If you are mature enough to get married and really want to work together to succeed, you need to face your finances. As a couple, you need to get over any fears about assessing the financial situation and air everything out. It doesn’t have to be painful but it needs to be an honest outlook. For some couples, this can seem really overwhelming but it doesn’t have to be.

Get Tips on How to Talk Finances With Your Partner

Get a Plan

Have a conversation about how to best review everything. Discuss each of your finances and then surmise a plan to tackle them. Now in some cases, it may not be this simple depending on your income level, occupation, and level of debt. You may want to meet with a financial counselor first and go over everything together, or sit down as a couple at home and discuss the basics before moving any further. It’s totally up to you both, as a team.

Don’t be shy or embarrassed by your financial situation as a couple. There are people who make a living on making sure couples are financially confident and ready to tackle financial goals together. Don’t overlook this benefit of consulting with an outside source about finances—especially if you feel like you don’t know what you’re doing. If you can’t afford an outside counselor check online, you may be surprised at the educational resources available for free. When it comes to self-learning about finances just be careful how you select your resources. As the old saying goes not everything you see online is true!

Loan Responsibility

When the person you’ve chosen to marry has student loan debt you can face some challenges. If you haven’t co-signed for a spouse and it’s just their name on the loan, this won’t be something that shows up on your credit report. Beware that even if you did not co-sign your partner’s loan there are instances when you might be responsible for paying the loan. Student loans aren’t that different from other types of loans.

For example, if someone passes away, the rest of their loan will likely be forgiven and the spouse would not have to continue making those payments. There are some cases where death will not discharge the remaining debt and the loan company may contact the estate for payment. If your spouse ever lost their income and went into default, the loan companies will look for someone to pay. If your spouse doesn’t have an income, your wages could be garnished. It’s a pretty extreme scenario, but it also happens and is something you should be aware of.

If you are choosing to marry someone with student loan debt, it’s important to talk about this. You’ll want to have a plan set up for each of these scenarios. Though they are extreme if you have savings and you pay down your debt responsibly you shouldn’t have any problems.

Repayment Plan Adjustments

IBR and other types of repayment plans are often used when paying back student loans. We would caution against using these programs. In some cases, your monthly student loan payment may not be covering the interest accrued that month and therefore your balance will continue to increase.

Repayment plans can be based on your household income and family size. When you get married your income and family size may change. If your spouse makes a considerable amount of money, your minimum payments could go up even with your family size going up. If your spouse makes less than you or is not working, your loan payment could go down. It all depends on the details of your financial situation and your loan servicer, but it’s worth noting that this is a possibility.

Refinancing

Fairly often we receive request to refinance couple’s student debt together. Many see this as creating a lot less hassle for themselves by creating only one bill. That’s not always possible, and many experts suggest keeping your loans separate in case your relationship status or financial situation changes in the future. You are not always able to refinance together, either. Whether or not you can refinance your student loan with your spouse will depend on the loan type and servicer you have. If you’re looking into refinancing, talk to each other about goals. Do you want a lower payment so you can save for a house or do you want to pay loans off sooner so you can live abroad or go to grad school? Again, it’s up to the two of you, but you can’t be on the same page if you don’t talk about it.

Don’t stress.

Take a deep breath and know that it’s normal for people to get stressed out talking about money, but it doesn’t have to be that way. No matter how much money you make, you will have to work together as a team to set priorities. This isn’t a blame game. Just talking about finances doesn’t mean that you’re secretly harboring any resentment or grudges. No one is being attacked and no questions are stupid. You both have to agree to create an open dialogue where you both feel good about discussing money and plans. Know that sometimes there are compromises, or one of you might change your personal plans to advance the other. That’s what it means to be a team.

Tips for Finding the Perfect Lender to Refinance Your Student Loans

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Financial Education

Employers have begun to understand that their own financial success is tied to the financial success of their employees. As a result, some employers have begun to offer financial education opportunities. These opportunities come in many forms, including workshops, webinars and even counseling. While many employees already have a firm grasp on financial concepts, these programs can still be incredibly beneficial to those weighed down by student debt as they often cover lesser-known tactics and reinforce familiar strategies.

Student Loan Repayment Signing Bonuses

Another method of helping employees with student debt is the signing bonus. For example, some companies offer $1,000 towards student loans for new hires. This $1000 can drastically reduce the amount graduates pay in interest over the life of their student loans and is an effective way for companies to hire and keep dedicated, hardworking employees.

Employer Repayment

The most exciting benefit employers are beginning to adopt is direct assistance with student loans. Now, in addition to savvy fiscal advice, some companies are backing up their support with dollars and cents. A few companies now offer yearly bonuses to help pay back student loans. One of the most generous of these companies is Nvidia. Employees earn $6,000 a year towards their student loans up to a $30,000 maximum. Several companies offer comparable or lower amounts. Regardless of the repayment amounts, this innovative strategy provides a new way to fight back against student debt. A variation of this policy is occasionally used, as well. In this variation, employees who don’t take their PTO can trade their PTO days for student loan assistance. With many in the United States not taking their PTO days anyway, this is a compelling option for student loan borrowers.

Contributions to 401(k) Plans

It may seem strange for 401(k) contributions to go hand-in-hand with paying off student debt. You might even expect to have to choose between them. If you’re employed by Abbott Laboratories, though, you don’t have to choose. Employees who contribute at least 2% of their pay toward student loans are eligible for the full 5% employer matching in their 401(k), even if they do not otherwise contribute to their 401(k). Abbott Laboratories is the first company to offer this incentive to help employees to pay off student debt, and hopefully many companies will follow in their footsteps. Sadly, these types of programs are not as commonly offered as they should be, but that isn’t necessarily bad news for you. If student loan assistance programs are something that you would like to see at your company, then make an appointment to speak with either your boss or to human resources. In this day and age, the competition for the best employees is fierce, and employers are always looking for ways to keep employees happy. In some cases, it may even be cheaper than a raise. It’s also worth mentioning your interest in such programs while negotiating your salary and benefits package for a new job. They may include it as an additional benefit. If your employer already provides these benefits, that’s fantastic! You’re already one step closer to being unburdened by student debt. If you're curious about how to finish the job and free yourself from student debt completely, one great way to do that is Student Loan Refinancing. You can learn more here.

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

2020-08-04

Student Loans: What is the Difference Between a Principal and an Interest Payment?

If you’re planning on going to college, you should be prepared for potentially high costs. The average cost of tuition and fees at a public four-year university for an in-state student is $10,440, while it’s $36,880 at a private school. By Kat Tretina While those numbers are pricey enough on their own, financing can add to the expense. If you borrow money to cover the total cost of attendance, you’ll end up repaying more than you initially borrowed because of interest charges — what lenders charge you in exchange for lending you money. When dealing with student loans, it’s important to understand how student loan interest rates affect your repayment and how your extra payments are applied to your debt.

How Student Loan Interest Rates Affect Your Loan Balance

Student loan interest rates can cause your loan balance to grow over time. The higher the rate, the more interest that accrues. For example, if you took out $30,000 in student loans and qualified for a 10-year loan at 4% interest, you’d pay $6,448 in interest charges on top of the $30,000 you borrowed. But if you qualified for a $30,000 loan at 5% interest — a difference of just 1% — you’d pay $8,184 in interest charges. The extra percentage point would cause you to pay over $1,700 more in interest charges. However, you can cut down on interest payments by paying off your debt ahead of schedule. When you pay off your loans early, less interest accrues over your loan's life, allowing you to save money.

The Difference Between Principal and Interest Payments

When you enter into repayment, your loan payments cover two different aspects:

- Interest: Interest that has accrued to date
- Principal: The original loan amount

When you make a payment, lenders typically apply the payment to any fees first, such as late fees or returned payment fees, then to interest charges. If any money is left over, they will apply the excess to the principal balance.

Education Loan Finance Student Loan Repayment Options

If you take out private student loans from ELFI*, you can choose from the following repayment options:

- Immediate repayment: You make payments toward the principal and interest right after disbursement
  - Best for: You’re working while in school and can afford the payments. You want to pay the least amount of interest possible.
- Interest only: While you’re in school, you make payments that only cover the interest that accrues on the loan.
  - Best for: You can’t afford to make full payments, but you want to minimize interest charges. You’re working part-time or have some income while in school.
- Partial payment: With partial payments, you make a flat-rate payment — typically $25 — while you’re in school.
  - Best for: Money is tight while you’re in school, but you want to chip away at some of the interest that accrues.
- Fully deferred: If you opt for fully deferred repayment, you don’t make any payments at all while you’re in school. This is the most expensive repayment option, as more interest accrues over the life of the loan.
  - Best for: You are in a rigorous academic program and need to completely focus on your studies, so you don’t want to make any payments while in school.

Use the private student loan calculator to see what your payment would be and how much you’d repay over the life of the loan under each repayment plan.*

Student Loan Repayment Strategies to Pay Off Your Debt Faster

Once you graduate, there are ways to accelerate your debt repayment and reduce the amount of interest that accrues.

1. Make Extra Payments

If you want to pay off your debt faster and are thinking about different student loan repayment strategies, consider increasing your minimum monthly payments. More of your payment will go toward the principal each month, reducing how much you’ll pay in interest and allowing you to pay off the debt ahead of schedule. For example, if you had $30,000 in student loans at 5% interest and a 10-year repayment term, your monthly payment would be $318 per month. If you only made the minimum payments, you’d repay a total of $38,192 by the end of your loan term. If you increase your payments to $368 per month — an addition of just $50 per month — you’d pay off your loans 20 months early. And, you’d repay just $36,731. By adjusting your monthly payment, you’d save $1,461.

2. Use the Debt Avalanche or Debt Snowball Methods

If you have multiple student loans, consider using either the debt avalanche or debt snowball method to tackle your debt. With the debt avalanche method, you make extra payments toward the loan with the highest interest rate. With the debt snowball, you target the debt with the lowest balance first. Which is best for you? It depends on your goals and personality. Learn more in our breakdown of the debt snowball and debt avalanche method repayment strategies.

3. Refinance Your Debt

Student loan interest rates have a big impact on your overall repayment. By refinancing your student loans,* you can qualify for a lower interest rate so more of your monthly payment goes toward the principal. Over time, refinancing can help you save a significant amount of money.

The Bottom Line

By understanding how payments work and how student loan interest rates affect your total repayment, you can pick a repayment plan that works for you. If you still have questions, ELFI’s Personal Loan Advisors can walk you through the loan application process and answer any questions you have.*

*Subject to credit approval. Terms and conditions apply. Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

2020-07-31

This Week in Student Loans: July 31, 2020

Please note: Education Loan Finance does not endorse or take positions on any political matters that are mentioned. Our weekly summary is for informational purposes only and is solely intended to bring relevant news to our readers.

This week in student loans:

Trump: Student Loans May Be Suspended For “Additional Periods Of Time”

With a second stimulus package on the way, Trump has stated that student loan suspensions may be extended past the already in place deadline.

Source: Forbes

Here’s How the Latest GOP Coronavirus Relief Proposal Would Impact Student Loans

The GOP has released their coronavirus relief proposal, but experts claim that it is largely ineffective in helping student loan borrowers.

Source: CNBC

What to Know About Changes Coming to Student Loan Servicing

In an attempt to streamline student loan servicing, the US government has signed contracts with five companies to provide customer service and back-office support to federal student loan borrowers.

Source: U.S. News & World Report

man researching whether to refinance student loans

Should You Refinance Student Loans? What to Consider as Legislators Debate New Stimulus Package

Refinancing rates are incredibly low, but due to the second stimulus package not yet being put in place, student loan borrowers are unsure of when the best time to refinance will be.

Source: Newsweek

That wraps things up for this week! Follow us on Facebook, Instagram, Twitter, or LinkedIn for more news about student loans, refinancing, and achieving financial freedom.