Marrying my debt

I got married July 1, 2017.  We are coming up on our 14 month anniversary and we are thinking about raising our new little baby boy, house decorating and remodeling, and vacations. What we certainly are not thinking about is divorce.  I found an interesting article, or rather my husband found it and thought it was funny given my student loan situation.  Recent survey’s have found that 13% of divorces can blame student loans for the split.

See the article from CNBC here: 1 in 8 Divorces is caused by student loans

Furthermore if you Google the topic, I found there to be many articles on generally the same topic.  This older article from NBC details the fact that many millennials are delaying certain life events due to their debts.

I find this to be a topic I can relate to due to my fairly recent marriage. I never spared any details of my student loans from my now husband, and remained completely open regarding my plans on how I would tackle the debt.  This would be my number one advice for anyone with student loan debt, or any debt for that matter, prior to marriage. Your partner needs to know the full situation, no matter how bleak.  There is no shame in being honest to your partner regarding all debts.  There is shame is trying to hide from it, and not being honest regarding your financial responsibility.

In general, any student loan debt that was acquired before marriage is owned solely by that person.  If you live in a community property state, any debt that is acquired during the marriage is owned by both parties whether or not each signed on the loan or not.  There are 9 community property states which include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin, and Alaska as an opt in state.  It is safe to say that my half a million dollars of student loan debt is mine forever.

Just also consider that if you are doing a public service loan forgiveness and doing any of the income based repayment plans, suddenly filing your taxes jointly could cause your monthly payments to increase because the program will now consider your spouses income in calculating that monthly payment.

My husband knows that I am tackling my debt with every paycheck. While we did get married, we didn’t marry completely all of our finances. We have separate bank accounts and assets. We try to pay equal shares of bills. We each make a decent income.  I have never asked or expected him to take part in my student loans, or make payments on my behalf.  I never assumed that his income would take part in my debt.  I have maintained the mentality that whats mine is mine, which includes my ginormous pile of debt.  I can’t expect my husband to start sending all his hard earned money to a debt that he never wanted, signed up for, or benefited from.  Perhaps that is the biggest mistake over those failed marriages from the article.  I am proud to say that we will not be one of those 13% of divorcees any time in the future.

Dr. J

 

 

 

 

Avalanche vs Snowball method on 500k of student loans.

Boring investor sites state there are two ways to pay off debt. The avalanche method is when you pay down higher interest loans/debt first. In the snowball method you pay down the loans with the lowest balances off first. This is assuming you have multiple loans/debts which I’m sure 99% of individuals do. What are the advantages of these methods?

In the avalanche method, as you might imagine, you will save money on the interest. You know how much I hate interest. My rate on my loan with FedLoan Servicing is a grand 7.37%. Basically robbery.

The snowball method could prove beneficial for a person in the fact that paying off smaller loan balances could eliminate that monthly payment or obligation. That extra money could then be used towards increasing payments on the remaining debts. There is also highly gratifying mental pleasure in paying off smaller loan balances.

Which method do I employ? I’ve decided that the snowball method works best for me. I have one huge loan with FedLoan servicing for about $490k and a smaller cookie crumb of a loan with Navient for a mere $15k. My monthly obligation for Navient is $192 a month. Thus eliminating this debt would give me that extra month toward the big kahuna. Now, this doesn’t just apply to student debts either. I do also have a car payment but this debt is a zero percent interest rate (yes, you heard me right) thus, paying this off early just doesn’t make sense. Also keep in mind that credit cards can have the worst interest rates in all of time, so take a look and really analyze your debts. How you pay off your debts can actually save you time and money as I have mentioned before in my previous blog post about biweekly payments.