Student Loans in the News: Marrying Your Student Loans
A brief round-up of recent articles and blog posts that discuss current student loan debates and data
About the author: Kevin Mahoney, CFP® is a fee-only financial advisor in Washington, D.C. Kevin's work with his clients focuses on paying off student loans, buying a house, investing savings, and budgeting. Kevin is the founder & CEO of Illumint, a virtual financial planning firm specifically designed to help couples and young families with their financial decisions.
Should your student loans and your spouse’s get hitched?
Author Ryan Lane writes:
"If you co-sign a refinancing loan or combine debts with your spouse, you’re equally responsible for repaying the balance — even after a divorce.
'There is no exit ramp,' says Joshua R.I. Cohen, a lawyer in West Dover, Vermont, who operates TheStudentLoanLawyer.com.
For example, Cohen says a divorce decree could outline who’s responsible for repayment, but both names remain legally on the debt. That means if one spouse doesn’t pay, the other still suffers the consequences of missed payments, like damaged credit and collection calls.
Divorcees could refinance the loan or portions of it into their individual names to get around this, but only by meeting a lender’s income and credit qualifications on their own."
3 reasons I didn't go on an income-driven repayment plan
Author Melanie Lockert writes:
"The primary reason I didn't go on IDR is that I didn't want to pay more in interest over the life of my loans — the longer you pay, the more you ultimately pay in interest. I wanted to stick to the Standard Repayment Plan, which has the shortest repayment period of 10 years and would ultimately cost me the least amount in interest.
When I realized I was paying $11 per day in interest, I was furious. I didn't want to pay a penny more than I had to. So I had to make a difficult choice and decided to chip away at my savings and hustle like crazy to continue making payments. I had $10,000 saved up which I slowly chipped away to $2,000 until I got a better job. I side hustled on weekends as a brand ambassador, pet sitter, event assistant, and more.
I knew that if I went on IDR, the interest would compound and make it nearly impossible to get ahead. Even though I didn't love it (and don't necessarily recommend it), I chose to dip into my savings so I could keep up with my payments. I was lucky to have the savings to begin with, but it felt weird to watch it dwindle away to pay for something when I knew I could have made it more affordable and easier for myself.
I knew my interest would make my balance balloon. Yes, I could have gotten that amount forgiven after 20 to 25 years. But under current law, borrowers are responsible for paying income taxes on that forgiven amount, which could be a bigger bill than I could handle. Based on calculations, my balance would have more than doubled and I'd have to pay taxes on forgiveness of six figures of debt."
[Read the entire article over at Business Insider]
Joe Biden's stealth proposal to cancel billions in student loan debt
Author Justin Haskins writes:
"Unlike many of the plans put forward by Biden’s challengers, the former vice president’s proposal seems to have been deliberately designed in such a manner that most wouldn’t realize its extreme and far-reaching effects.
Instead of immediately cancelling debt, Biden’s proposal would alter existing student loan forgiveness programs to eliminate billions in student loan debt decades in the future, potentially affecting millions of borrowers.
Here’s how it would work: Under current law, borrowers with federal student loans (most current students and recent college graduates) who are enrolled in income-based repayment plans receive student loan forgiveness after 20–25 years of making payments. The amount of years required varies with the repayment plan.
Because these borrowers’ monthly payment amounts are tied to their income, those with very high amounts of debt and low or moderate incomes would not pay off their student loans, because their monthly payments will never amount to the full value of the loan plus interest charged."