$100k in studen loan debt...deal breaker

[jakelongot]

Long story short my g/f and I have been dating for just about 4 years. There is talk of marriage and we are starting to plan our lives together. Yesterday however I just found out she has $100k in student loan debt!

 

She just graduated in August. She is employed and working in a good field with huge earning potential (especially down the line when she can go into private practice), but that number really scared me. She didn't seem too concerned as she was expecting a large number, even though she does admit it was higher than she expected. It is worth noting that this is simply 4 years of college and 2 1/2 years of grad school so it is not like she was making poor education decisions.

 

I love her and she is a very capable person. It is student loan debt and not credit card debt or anything. That being said, the number really freaked me out. I am less than 2 years from finishing paying up my loans myself.

 

Would something like this make you think twice about marrying this person? Dealbreaker? I don't want to sound shallow and I do truly love this person, but it certainly makes me nervous if god forbid something ever happened to her and I would inherit her debt...i've always been very careful about managing mine. Her student loan payment is like a mortgage payment every month!

 

Any advice would be greatly appreciated. Thanks!

[carhill]

She has a 'mortgage' on the 'house' of her professional life, an asset which will pay her and her progeny long after my flesh and bones have been burnt in an oven.

 

That's how I'd view it.

[BikerAccnt]

Normally I'm not a fan of these, but that number would scare the bejesus out of me so...pre-nup a possibility ?

[TheNewMe2014]

I have never had a debt, other than a mortgage and car loan. My ex had a $100K student loan too. It didn't phase me. The thing has a nominal interest rate, can be paid over your life and can be deferred during tough times.

 

When she and I recently divorced, that debt went with her. That should not affect a relationship and how you feel about her. Her debt won't impact your ability to secure credit.

 

Seriously - don't let that stop you. And I'm a finance guy..

[Elias33]

The rise of education costs. Don't hold it against people. It is not like a gambling debt. It is for some of us the only way to make it in life. There are so many other reasons not to marry someone.

[isisisweeping]

I can't speak for sure about where you are, but I know for a fact where I am the debt incurred prior to marriage is not your responsibility if your spouse died. So, if that's your concern, just don't refinance with both of you. If she dies and her debt exceeds the value of her estate (which isn't presumed to be yours- though depending on the state and community property or not, assets such as property you acquired together might be partially viable in determining estate value), prenuptial debt is written off.

 

 

It'd be very easy choices to work out to deal with it until her debt is paid off.

 

 

I don't see it being a deal breaker, especially as she has the earning potential to pay it off.

[TXGuy]

It depends what degrees she has and if you are certain she is going to use it successfully.

 

If she has an MD, and you are confident she is not going to quit soon after marriage and babies, then $100k is no big deal.

 

If she has a degree in something less than marketable like philosophy, women's studies, history, English, etc, then it is an absolute dealbreaker.

 

If it is in something marketable, but you have the slightest inkling that she might want to 'take some time off for having children, then it is an absolute dealbreaker.

 

So, it depends on the marketability of the degree and whether you think she will use it.

 

I'm just guessing from your timeline of 2 1/2 years of post grad and claim that it is potentially lucrative, but is that an MBA? A STEM type masters?

[isisisweeping]

I made a bad choice in my marriage and took on more student loan debt because of the low interest rate to pay some high interest debt my ex had... it made a LOT of financial sense... as long as we stayed married, but when we divorced, I got to keep my student loan debt and he had everything paid off. So I know in divorce student loan debt goes with you, too!

[carhill]

One advantage to student loan debt, versus a house mortgage, is that they won't foreclose and evict you from your profession for stiffing them.

 

Any debt carries risk, whether that be a business loan, student loan, credit card loan, house loan, car loan, etc, etc.

 

The way I see it is that she borrowed 100K, probably one year's salary in her profession, to gain that professional asset. No one can ever take it away from her. In my view her downside risk is extremely low and her forward looking ROI is extremely high. Of course, the variable is her. You know her. We don't. Good luck!

[J21]

No, it's just money at the end of the day.

 

That is not a statement emphasizing I have a lot of money (I don't), rather, it is a statement emphasizing how little value it is worth in comparison to love.

 

I wouldn't care about her student loans. Its not like she went on a crazy CC spending spree, its student loans and a investment on her future career.

 

I would worry more about how I'd live my life without her if I didn't have her.

 

As meticulous you are with your money, I'm sure you will be back in the green again some day if you guys get married.

 

i personally would have much regret knowing I let someone go because of a little debt. Especially years down the line when I am financially ready to retire.

[TXGuy]

MBA? A STEM type masters?

 

Law? (Noticed the word practice).

 

If she gets a few years of BigLaw under her belt, $100k isn't a big deal. But there are a ton of attorneys struggling to find a job making more than $50k (law related or not).

[Allumere]

I want to reach through the screen and choke you...that is my reaction to your question. Seriously,you are blessed enough to be in what sounds to be a solid relationship with talk of marriage and a student loan would be a deal breaker....and she is employeed with good earning potential???? Be freaked about the mount, I think that's a normal reaction (and if you have had a student loan..which I think you did...then you know the feeling to get those bills) but as a deal breaker????? Sorry, if that is something you are even pondering then you have more doubts then what you are bringing to the table.

[InnocentMan]

Get married, emigrate, live happily ever after.

 

Don't forget to send the student loan company a nice letter wishing them luck in finding you.

[Art_Critic]

but that number really scared me.

 

Why would it scare you ? Did she ask you to pay it off ?

When you go to buy a house it's much more than 100k.. how will you feel then ?

 

I think in the end it's her debt, she just graduated and by the sounds of it will not have a problem paying it off, almost no risk to you and this debt wasn't created because she has a spending problem and shops every day for expensive clothes she can't afford.

 

Now if she had 100k of CC debt, then you run....fast..even faster than that...

 

Is she is worried about your debt or future debt ?

[CarrieT]

Why would it scare you ? Did she ask you to pay it off ?

When you go to buy a house it's much more than 100k.. how will you feel then ?

 

I think in the end it's her debt

But.....

 

If they live in a community property state and get married, he *could* be responsible for that debt as part of the marriage unless they have a very solid pre-nup.

 

Something only a lawyer could advise about and definitely something to investigate.

 

I also have $100k in student loan debt and my new husband married me anyway, knowingly taking on my debt.

[ThatMan]

One advantage to student loan debt, versus a house mortgage, is that they won't foreclose and evict you from your profession for stiffing them.

 

Any debt carries risk, whether that be a business loan, student loan, credit card loan, house loan, car loan, etc, etc.

 

The way I see it is that she borrowed 100K, probably one year's salary in her profession, to gain that professional asset. No one can ever take it away from her. In my view her downside risk is extremely low and her forward looking ROI is extremely high. Of course, the variable is her. You know her. We don't. Good luck!

That isn't true. Students loans are arguably worse than a house mortgage because you cannot default.

 

If you go into delinquency with student loans then it will be nearly guaranteed that licensure is impossible. Any future prospects that require you to be issued proper license through the government will end then and there. i.e. working in healthcare as a doctor. Any current or future jobs related to the financial sector will also end. So now we're talking about multiple careers being completely barred from you, many of which for life.

 

There are people with student loans who will never own a house, never own their own car, and possibly be in debt for the rest of their lives. There are also people in similar positions as the OPs wife who ran into unforeseen accidents. You can literally be bed-bound from a car crash and and your SSI will be garnished. Think being struck by a drunk driver, losing the use of your limbs, going into delinquency, and being forced into the worse welfare slum/assisted living center imaginable because your SSI will be garnished until the day you die. Defaulting on a student loan is nearly impossible and it can only be achieved through death. That's why so many graduates commit suicide - death is the only way out of a student loan if you cannot make ends meet.

 

With that said, 100k isn't really that big of a deal, and it isn't even a lot of money in terms of what many graduates have racked up. Usually it's the graduates with 160K student loan debt who cannot land a job outside of retail who run into trouble. I can name at least six people off of the top of my head who work in Target even though they have master's degrees. So long as the GF lands that job she wanted, doesn't run into unforeseen problems in life, it'll work out without incident.

Edited March 3, 2014 by ThatMan

[carhill]

I'd have to pull up the exact statutorial verbiage but here's a general overview in my community property state, and the court indeed did follow such guidelines when we divorced *without* a pre-nup.

 

"Community Property States

The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. (In Alaska, spouses can sign an agreement making their assets community property, but few people choose to do this.)

Debts. In community property states, most debts incurred by either spouse during the marriage are owed by the "community" (the couple), even if only one spouse signed the paperwork for a debt. The key here is during the marriage. So if you incur a debt, such as a student loan, while you're single, and then get married, it won't automatically become a joint debt. (An exception is where a spouse signs on to an account as a joint account holder after getting married.) Some states, like Texas, have a more nuanced way of analyzing who owes what debts by evaluating who incurred the debt, for what purpose, and when.

After a legal separation or divorce, a debt is generally owed only by the spouse who incurred the debt, unless the debt was incurred for family necessities, to maintain jointly owned assets (for example, to fix a leaking roof), or if the spouses keep a joint account.

"

 

The interesting rub here, from a business/legal standpoint is that, while the student loan debt can be considered a separate debt, things get sticky if the young couple get married and the newly minted profession with that debt takes income (marital income, since earned after marriage) or debt (which becomes marital debt) to leverage that professional degree into a 'practice', meaning a business pursuit, as an example a doctor or lawyer or accountant, etc, in private practice or as a vested partner in a group practice. Their practice or vested partnership, can become, or be argued to be, a product of the marriage, even if the debt which brought it to fruition, the education of the young professional, is considered to be sole and separate debt.

 

Tricky stuff.

 

Since the OP is talking about marriage, which is a legal partnership, IMO it's time to start working through the generalities of how each party wants to prosecute that partnership. Still, I see that student loan as a minor issue. That's WAM for most of my friends who made those investments years to decades ago. It's really nothing. The important thing is having a healthy and productive partnership and marriage. The rest of the stuff will work out.

[carhill]

That isn't true. Students loans are arguably worse than a house mortgage because you cannot default.

 

If you go into delinquency with student loans then it will be nearly guaranteed that licensure is impossible.

 

I'll need a statutory citation on that. That hasn't been my experience with any professional who is licensed and practicing. I know because I've reviewed loan applications for such professionals with such loans in arrears or default/delinquency. Even judges.

 

If you mean that a loan in default *can* result in a denial of initial license, that's another matter.

[Art_Critic]

But.....

 

If they live in a community property state and get married, he *could* be responsible for that debt as part of the marriage unless they have a very solid pre-nup.

 

Something only a lawyer could advise about and definitely something to investigate.

 

I also have $100k in student loan debt and my new husband married me anyway, knowingly taking on my debt.

 

Good point.. but

 

I doubt it would be considered a marital debt..

From a source on the web:

 

a large majority of states hold that the degree is not marital property. Turner, supra, 6.20. Since the purpose of the loan was to obtain something which was not marital property, one court reasoned that the loan is a separate debt of the student spouse.

To me prenups are for protection of assets, IMO, unless he has significant assets then he would be stirring up a pot for no reason.

She might also be the larger wage earner and have more assets to protect then he does...

 

 

You are right that he should visit an attorney to nail down any issues but he also needs to balance why he is scared of 100k of debt when in a marriage over the long haul 100k in debt that might not even be marital debt is small potatoes and he might be biting his nose in spite of his face creating relationship drama when she has debt and no spending problem coupled with the ability to pay it all off.

[jakelongot]

Thank you for the responses everybody. They are all truly appreciated.

 

I have never had a debt, other than a mortgage and car loan. My ex had a $100K student loan too. It didn't phase me. The thing has a nominal interest rate, can be paid over your life and can be deferred during tough times.

 

When she and I recently divorced, that debt went with her. That should not affect a relationship and how you feel about her. Her debt won't impact your ability to secure credit.

 

Seriously - don't let that stop you. And I'm a finance guy..

 

Good insight. Thanks

 

Law? (Noticed the word practice).

 

If she gets a few years of BigLaw under her belt, $100k isn't a big deal. But there are a ton of attorneys struggling to find a job making more than $50k (law related or not).

 

She has a degree in speech and language pathology. Very difficult degree to achieve. She has options in education, medical and private practice. She wants a few years of experience under her belt before private practice, but in my area $200-$250/hr is the going rate...especially if you are good with kids (she is absolutely amazing)

 

I want to reach through the screen and choke you...that is my reaction to your question. Seriously,you are blessed enough to be in what sounds to be a solid relationship with talk of marriage and a student loan would be a deal breaker....and she is employeed with good earning potential???? Be freaked about the mount, I think that's a normal reaction (and if you have had a student loan..which I think you did...then you know the feeling to get those bills) but as a deal breaker????? Sorry, if that is something you are even pondering then you have more doubts then what you are bringing to the table.

 

I am a worrier by nature. By no means was a ready to dump her when I saw it...i simply panicked. It is great to have a forum like this to vent. Makes me see how silly I am being. It is comforting seeing such a overwhelming response that I should not be too concerned.

 

Why would it scare you ? Did she ask you to pay it off ?

When you go to buy a house it's much more than 100k.. how will you feel then ?

 

I think in the end it's her debt, she just graduated and by the sounds of it will not have a problem paying it off, almost no risk to you and this debt wasn't created because she has a spending problem and shops every day for expensive clothes she can't afford.

 

Now if she had 100k of CC debt, then you run....fast..even faster than that...

 

Is she is worried about your debt or future debt ?

 

She is not worried at all. And her only debt is the student loan debt...all in pursuit a challenging, fulfilling and ultimately very rewarding career.

[Mo_Do]

That much debt would certainly be a deal breaker for me as well.

 

The other thing that'll stop everything are career students! Was talking with an attractive lady a couple weeks ago. I asked where she went to school and she listed off every single local college in a 50 mile radius as well as every ridiculous course you could take - including the current one she was in, at 31 years old.

 

I figure she must have been hiding away in community college for the past 10-12 years - instant deal breaker!

[Art_Critic]

op would be totally retarded to finish off paying his student loan debt and having to start to pay hers....

 

No where in this thread has he said that she was expecting him to pay her debt or that he was even considering doing it.

 

In fact.. in the thread he mentions that with the field she is in she won't have any problem paying it back.

[carhill]

I feel I should clarify one aspect, regarding the marital responsibility to debt incurred prior to marriage. CFC §2627 does indeed delineate debts incurred prior to M to run with the debtor as their separate debt, but there are allowances in statute to allow a debt holder to reach the *marital* assets to satisfy the debt, while the partners are legally married. If a legal separation or divorce is filed, then that reach is terminated with the filing of the respective lawsuit. One method of limiting such marital asset 'reach' is to maintain a sole and separate financial account where the non-debtor spouse deposits their *earnings* and the debtor spouse has no access and no moneys are co-mingled.

 

OP, if any of this is of interest to you, check your local jurisdiction for relevant statute. If nothing else, if things proceed and you engage legal counsel for marital/estate/business advice, you'll have an overview going in and can target issues specific to your needs and save on legal fees. Learned that tip from my lawyer

[jakelongot]

No where in this thread has he said that she was expecting him to pay her debt or that he was even considering doing it.

 

In fact.. in the thread he mentions that with the field she is in she won't have any problem paying it back.

 

She is in no way expecting me to pick up the tab. She has accountability for her debts. I'm just thinking out loud for events that may happen in the future..again the worst case scenario of something happening to her and me being expected to pay back her student loan debt.

 

FYI...we live in mass (not a community property state) and all the student loans will have been taken out and begun repayment at least a year in advance of our marriage.

[iris219]

I understand your concern OP, but you will not be responsible for debt accrued before a marriage, so no worries there.

 

Sometimes, even when it was accrued during the marriage, the other party is not responsible. My FI recently got divorced and it was decided that the student loans he took out to support his ex wife and children were solely his responsibility. She walked away with no obligations.