How to tackle fiancee's student loan debt

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
RedClay
Posts: 33
Joined: Mon Mar 13, 2017 10:17 am

How to tackle fiancee's student loan debt

Post by RedClay » Mon Mar 13, 2017 11:20 am

Hello, I am a first-time poster and long-time lurker. I have some questions about debt repayment. I will graduate law school in a few months and will start working in October at a salary of $180k. My fiancee will be in grad school for two more years, and her estimated starting salary in the spring of 2019 is about $70k. My current account balances are listed below.

Ally Savings: $4k
BofA Checking: $5k (expecting $3k tax refund in 1 week, and $7k salary advance in 3 months)
Vanguard MF - Taxable: $11.3k
Vanguard MF - Roth IRA: $12.6k

Her loan balances from the first year of grad school are below:

$6.5k @ 5.84%
$13k @ 5.31%
$14k @ 6.31%

The remainder of her grad school will cost about $85k. I have no debt from undergrad or law school, and my fiancee has no other debts (or significant assets). We plan to start renting in June with monthly expenses (rent, utilities, food) of about $1600.

My main question is this: how would you go about paying off the debt and/or investing at the same time?

My current plan is below.

1. Pay for our monthly expenses out of savings until I start working in October.
2. Use any excess cash to pay her tuition expenses as they come due.
3. Once my liquid assets (all except Roth IRA) have declined to about $5k, my fiancee will again take out loans. I estimate she will have to take out another $25k in loans for Fall '17 and Spring '18 at an average interest rate of 6%. I do not plan to touch the money in the Roth IRA.
4. When her Summer and Fall '18 tuition is due, I should have enough saved to again pay for all of her tuition (without taking out any more loans).
5. After I pay the last tuition statement in August 2018, I begin aggressively paying down the then-existing debt of $60k. By my calculations, we would be debt-free by the spring of 2019.

My general strategy is to pay down the high interest rate debt as quickly as possible while also trying to avoid taking out additional loans and paying origination fees (1% for unsubsidized loans and 4% for GPlus loans). In terms of investing, I will max out my 401(k) contributions and open an HSA, but I won't be contributing additional money to the Roth IRA or investing in taxable accounts until all of the debt is paid off.

What do you think about this plan? I'm open to any suggestions or criticism. Thank you for your help!

SheReadsHere719
Posts: 86
Joined: Fri Jan 06, 2017 7:28 pm

Re: How to tackle fiancee's student loan debt

Post by SheReadsHere719 » Mon Mar 13, 2017 1:14 pm

Sounds like you and your fiancée are off to a good start: no law school loans and low monthly expenses. Even better that you’re on the same page about paying down her debt. A few thoughts below:

*If she will be in school until spring 2019 and you won’t begin full-time work for another 6-7 months, I hesitate to recommend you draw down your cash reserves to pay her tuition. I would keep ~$10k in your Emergency fund (across Ally savings + BofA checking) representing ~6 months of living expenses @ $1,600. Monthly expenses can be covered in cash until October, but I would recommend taking some tuition loans so as not to be too cash-poor (even with the high interest rate).

*Not sure if your Roth represents recent or prior earnings. If you had any income in 2016, take the money currently in your taxable or checking and contribute to the Roth IRA instead before 4/18. You should also be able to contribute for 2017 as you’ll only earn your full-time income for the last 3 months of the year. That is tax-advantaged space you won’t be able to get back once you’re making $180k/year.

*Numbers 3, 4, and 5 sound good to me. I also agree with the HSA and 401k contribution, but would encourage Roth IRA contributions (backdoor once you’re working). Agree with student loan payoff over taxable.

Once you start working, you can throw $ at the loans anytime you have extra cash flow, but I think keeping some cash on hand for the next few months until you start working is your best bet.

delamer
Posts: 6267
Joined: Tue Feb 08, 2011 6:13 pm

Re: How to tackle fiancee's student loan debt

Post by delamer » Mon Mar 13, 2017 1:50 pm

Do not pay any education costs, either current expenses or paying back loans, for someone to whom you are not married.

This is not a commentary in any way on the quality of your relationship, which obviously I know nothing about. It is simply that life is unpredictable, and too many things can happen that make taking on someone else's financial obligations a bad choice. For instance, a bad accident that results in disability, or worse, can make you regret having spent money that you had no legal obligation to provide.

Once you are married, then work out a plan to repay her debt.

niceguy7376
Posts: 2146
Joined: Wed Jul 10, 2013 2:59 pm
Location: Metro ATL

Re: How to tackle fiancee's student loan debt

Post by niceguy7376 » Mon Mar 13, 2017 1:56 pm

A three year graduate school that costs 115K but only pays out $70K in first year. That is one costly education.

Thankfully, she doesnt have any undergrad loans.

As for tackling, following are options that she needs to look through:

1. Refinance to low APR
2. Options for Income based payments
3. Is this a type of education that forgives based on working under a set of rules - Heard about doctors or attorneys getting loans cleaned if they work in public service domain.

Jackbnimble
Posts: 34
Joined: Mon Jan 30, 2017 10:24 am

Re: How to tackle fiancee's student loan debt

Post by Jackbnimble » Mon Mar 13, 2017 2:02 pm

I agree with the post above about not paying any expenses of your fiancé until you guys are married. I worked with a guy that supported his fiancé all the way through pharmacy school only for her to move on to someone else after she graduated. Obviously I have no idea how your situation will turn out, but be careful here. Reading these message boards you see normally sane people doing absolutely crazy things.

Tal-
Posts: 358
Joined: Fri Apr 22, 2016 10:41 pm

Re: How to tackle fiancee's student loan debt

Post by Tal- » Mon Mar 13, 2017 2:23 pm

I think that my thoughts would vary drastically based on your relationship and specific plans with your fiance.

Assuming that you are planning to be married for life, and plan to have joint finances, the time around marriage is when you start to merge finances. If you end up doing this a month or two before you're formally married - this doesn't give me much gray hair. But, if you don't have a date planned, or are not planning on anything within the next 2 months, I would echo the comments above about keeping finances separate until marriage. There's a big difference between having joint finances with one bread winner and being someone's sugar daddy :)

With that said, assuming you're getting married soon, I'm also not real concerned about your finances. I don't especially care if the next 24 months of college are financed or not, and I don't think you're talking about unrealistic amounts of debt, given your projected incomes. Sure, coming out of college debt-free is ideal, but it's not a black-and-white question to me - and if your partner starts work while you jointly have 50K in student debt but $80K saved in various retirement funds, you should be nothing but proud of yourself!

What you DO need to do is continue to manage your expenses. You're doing great with this so far, and $1600/month is a good number to live off of. Tattoo this number in your arm, next to the date of Spring 2019. Do this, and keep doing it until she is fully employed. Do not waver. Do not get a new car. Do not take a fancy vacation. And don't spend a crazy amount on a wedding ring. If you can make $180K and live on $1600/month for a while - the rest is just details...

Regarding the details - be sure that you are getting any available company match in your retirement plans. Then, I would get a bit of an emergency fund. Only then would I start asking questions about where to put excess cash - and I'd probably split that between debt and investments.
Debt is to personal finance as a knife is to cooking.

flyingbison
Posts: 1363
Joined: Wed Mar 12, 2014 8:52 am

Re: How to tackle fiancee's student loan debt

Post by flyingbison » Mon Mar 13, 2017 2:39 pm

Jackbnimble wrote:I agree with the post above about not paying any expenses of your fiancé until you guys are married. I worked with a guy that supported his fiancé all the way through pharmacy school only for her to move on to someone else after she graduated.
Couldn't the same thing have happened if they were married?

pangea33
Posts: 46
Joined: Mon Jan 16, 2017 11:57 am

Re: How to tackle fiancee's student loan debt

Post by pangea33 » Mon Mar 13, 2017 2:49 pm

flyingbison wrote:
Jackbnimble wrote:I agree with the post above about not paying any expenses of your fiancé until you guys are married. I worked with a guy that supported his fiancé all the way through pharmacy school only for her to move on to someone else after she graduated.
Couldn't the same thing have happened if they were married?
There would at least be a legally-binding financial component if they were married.

User avatar
Meg77
Posts: 2410
Joined: Fri May 22, 2009 1:09 pm
Location: Dallas, TX
Contact:

Re: How to tackle fiancee's student loan debt

Post by Meg77 » Mon Mar 13, 2017 2:53 pm

flyingbison wrote:
Jackbnimble wrote:I agree with the post above about not paying any expenses of your fiancé until you guys are married. I worked with a guy that supported his fiancé all the way through pharmacy school only for her to move on to someone else after she graduated.
Couldn't the same thing have happened if they were married?
It could, but divorce gives couples a legal way to manage those issues via divorce court. If you're not married and your fiancé wipes out your joint checking account and skips town, you're SOL legally speaking. But death or disability is also a possibility. Many federal student loans are forgiven upon death or disability, but if you're not married you wouldn't be liable for her debts in any event if she were to die tragically.

In general though, even if you aren't worried about any of the above, it still makes sense to me for her to continue to take out loans until you begin working at the very least. I've seen law firms renege on offers to young associates; anything can happen. It's fine to live off savings until you start getting paid, but not to pay her tuition out of said savings. It would be different if you had $50K in savings, but with such a relatively small buffer during quite a large transition (moving, new job, marriage), I would really err on the side of caution.

Also this may be way more advice than you have any interest in hearing, but please talk to your fiancé candidly about your family plans. I have so many high earning couples friends opt for the wife to stay home once they start having kids - many with MBAs and law degrees who only got a few years of income out of those careers before calling it quits. Most women claim they'll want to continue working when they have children, but many with high earning spouses such as yourself end up changing their minds because a) they can afford to and b) it's very stressful and expensive to juggle two ambitious careers plus raise small children. It would be a shame to pay six figures for a degree for your wife only for her to decide to stay home when you guys have a child because she "only" makes $75K or because she really wants to stay home.
Last edited by Meg77 on Mon Mar 13, 2017 2:57 pm, edited 1 time in total.
"An investment in knowledge pays the best interest." - Benjamin Franklin

User avatar
cheese_breath
Posts: 8007
Joined: Wed Sep 14, 2011 7:08 pm

Re: How to tackle fiancee's student loan debt

Post by cheese_breath » Mon Mar 13, 2017 2:53 pm

I wouldn't touch her debt until you are married.
The surest way to know the future is when it becomes the past.

delamer
Posts: 6267
Joined: Tue Feb 08, 2011 6:13 pm

Re: How to tackle fiancee's student loan debt

Post by delamer » Mon Mar 13, 2017 2:54 pm

flyingbison wrote:
Jackbnimble wrote:I agree with the post above about not paying any expenses of your fiancé until you guys are married. I worked with a guy that supported his fiancé all the way through pharmacy school only for her to move on to someone else after she graduated.
Couldn't the same thing have happened if they were married?
Yes, but it is my understanding that you'd have more legal recourse to get some of your money back if you were married versus only engaged or living together.

I hope someone with a legal background weighs in. Maybe the OP himself :happy

User avatar
BL
Posts: 8350
Joined: Sun Mar 01, 2009 2:28 pm

Re: How to tackle fiancee's student loan debt

Post by BL » Mon Mar 13, 2017 2:55 pm

I tend to agree not to take over her loans or tuition until married, for some of the reasons above. Keep investing all you can to fill all tax-advantaged space: 401k, Roth, HSA, etc. and get a healthy emergency fund and save for any other foreseen expenses.

She should plan to find ways to reduce rates on loans, look for future places to work while getting loan forgiveness, maybe even set her sights on a better paying major subject rather than borrowing so much for a job that doesn't pay so great for the invested time and money, or getting a fellowship that pays something while she is learning. It is not healthy for the relationship, in my opinion, to be dependent on a non-spouse for so much. She needs to take responsibility to tackle the loans, to the best of her ability.

User avatar
flamesabers
Posts: 1751
Joined: Fri Mar 03, 2017 12:05 pm
Location: Rochester, MN

Re: How to tackle fiancee's student loan debt

Post by flamesabers » Mon Mar 13, 2017 2:56 pm

delamer wrote:
flyingbison wrote:
Jackbnimble wrote:I agree with the post above about not paying any expenses of your fiancé until you guys are married. I worked with a guy that supported his fiancé all the way through pharmacy school only for her to move on to someone else after she graduated.
Couldn't the same thing have happened if they were married?
Yes, but it is my understanding that you'd have more legal recourse to get some of your money back if you were married versus only engaged or living together.

I hope someone with a legal background weighs in. Maybe the OP himself :happy
Wouldn't the only way for legal course in this type of situation is to prove the fiance married for the sole purpose of getting her loans paid off? More than likely though I suspect the courts would just say "tough luck" as the OP knew about the debt before getting married.
flyingbison wrote:
Jackbnimble wrote:I agree with the post above about not paying any expenses of your fiancé until you guys are married. I worked with a guy that supported his fiancé all the way through pharmacy school only for her to move on to someone else after she graduated.
Couldn't the same thing have happened if they were married?
Yes, but it's much more difficult to get out of a marriage then an engagement. A marriage is a legal contract that is certified by the state, while an engagement isn't. I supposed a couple could have their engagement be enforceable with a legal contract, but I don't think that's the norm.
cheese_breath wrote:I wouldn't touch her debt until you are married.
I agree. Once the OP gets married, her debt will become their debt.
Last edited by flamesabers on Mon Mar 13, 2017 3:03 pm, edited 1 time in total.

flyingbison
Posts: 1363
Joined: Wed Mar 12, 2014 8:52 am

Re: How to tackle fiancee's student loan debt

Post by flyingbison » Mon Mar 13, 2017 2:57 pm

pangea33 wrote:
flyingbison wrote:
Jackbnimble wrote:I agree with the post above about not paying any expenses of your fiancé until you guys are married. I worked with a guy that supported his fiancé all the way through pharmacy school only for her to move on to someone else after she graduated.
Couldn't the same thing have happened if they were married?
There would at least be a legally-binding financial component if they were married.
Legally bound to do what? Are you familiar with any divorces that required someone to payback support that was provided during the marriage? Anything is possible, I guess, but I've certainly never heard of it.

David Scubadiver
Posts: 522
Joined: Thu Mar 24, 2016 8:40 am

Re: How to tackle fiancee's student loan debt

Post by David Scubadiver » Mon Mar 13, 2017 3:06 pm

1) Maximize your 401(k) contributions.
2) Open up a traditional IRA, fill it, and convert it to a Roth IRA.
3) Once you are married, have your spouse do the same.

The idea here is to maximize the tax deduction offered by the 401(k) and to maximize the space in your Roth IRA.
If you can afford to pay her tuition without the loans, by all means do so. However, as a young attorney you should also prepare for the possibility that the boon years may not last as long as you hope. If you lose your big firm job in year 4, you may wind up taking a substantial pay cut. If you decide to quit, you may take a substantial pay cut. These events may be easier to handle if you have liquid reserves, which may be harder to accumulate if you are paying your fiance's tuition.

User avatar
JDCarpenter
Posts: 1389
Joined: Tue Sep 09, 2014 2:42 pm

Re: How to tackle fiancee's student loan debt

Post by JDCarpenter » Mon Mar 13, 2017 3:39 pm

David Scubadiver wrote:...If you lose your big firm job in year 4, you may wind up taking a substantial pay cut. If you decide to quit, you may take a substantial pay cut. These events may be easier to handle if you have liquid reserves, which may be harder to accumulate if you are paying your fiance's tuition.
This is important point. The $1600 monthly living expenses bodes well for future liquidity.

The big law train is not for everyone, and if you have children, the thrill of the job can begin to get offset .... The good news, however, is that the Big Law stint (along with the education credentials that got you in the door) keeps on giving after you leave. Unless you choose a low paid job, you are likely to continue obtaining good compensation in other facets of the legal world--although maybe not necessarily equivalent to that available to those who last in BigLaw.
Edit Signature

David Scubadiver
Posts: 522
Joined: Thu Mar 24, 2016 8:40 am

Re: How to tackle fiancee's student loan debt

Post by David Scubadiver » Mon Mar 13, 2017 3:49 pm

JDCarpenter wrote:
David Scubadiver wrote:...If you lose your big firm job in year 4, you may wind up taking a substantial pay cut. If you decide to quit, you may take a substantial pay cut. These events may be easier to handle if you have liquid reserves, which may be harder to accumulate if you are paying your fiance's tuition.
This is important point. The $1600 monthly living expenses bodes well for future liquidity.

The big law train is not for everyone, and if you have children, the thrill of the job can begin to get offset .... The good news, however, is that the Big Law stint (along with the education credentials that got you in the door) keeps on giving after you leave. Unless you choose a low paid job, you are likely to continue obtaining good compensation in other facets of the legal world--although maybe not necessarily equivalent to that available to those who last in BigLaw.
I have been with big law for over 20 years. Recently, I spent a considerable amount of time looking for work outside of big law, and found that it is definitely not easy. In fact, much of what I came up with paid less than a first year's starting salary. Kind of depressing. On the other hand, 20+ years in big law has given me a pretty good leg-up on retirement savings!

User avatar
JDCarpenter
Posts: 1389
Joined: Tue Sep 09, 2014 2:42 pm

Re: How to tackle fiancee's student loan debt

Post by JDCarpenter » Mon Mar 13, 2017 4:14 pm

David Scubadiver wrote:
JDCarpenter wrote:
David Scubadiver wrote:...If you lose your big firm job in year 4, you may wind up taking a substantial pay cut. If you decide to quit, you may take a substantial pay cut. These events may be easier to handle if you have liquid reserves, which may be harder to accumulate if you are paying your fiance's tuition.
This is important point. The $1600 monthly living expenses bodes well for future liquidity.

The big law train is not for everyone, and if you have children, the thrill of the job can begin to get offset .... The good news, however, is that the Big Law stint (along with the education credentials that got you in the door) keeps on giving after you leave. Unless you choose a low paid job, you are likely to continue obtaining good compensation in other facets of the legal world--although maybe not necessarily equivalent to that available to those who last in BigLaw.
I have been with big law for over 20 years. Recently, I spent a considerable amount of time looking for work outside of big law, and found that it is definitely not easy. In fact, much of what I came up with paid less than a first year's starting salary. Kind of depressing. On the other hand, 20+ years in big law has given me a pretty good leg-up on retirement savings!
Oh yeah, in your situation, it is tough to come close to the pay package unless you have the expertise and contacts to become GC at a significant entity. I withdrew a long time ago, just a few months before first partnership eligibility--DW made a lot more money and we had three under age 4.... 15 years later, different state, came back in to a lit boutique with pretty good pay to cover private colleges--but naturally nowhere near what my peers were and are making. Looking forward to seeing how long daughter in law perseveres (Like the OP, a 3L...)
Edit Signature

mouses
Posts: 3812
Joined: Sat Oct 24, 2015 12:24 am

Re: How to tackle fiancee's student loan debt

Post by mouses » Mon Mar 13, 2017 4:43 pm

Meg77 wrote:
flyingbison wrote:
Jackbnimble wrote:I agree with the post above about not paying any expenses of your fiancé until you guys are married. I worked with a guy that supported his fiancé all the way through pharmacy school only for her to move on to someone else after she graduated.
Couldn't the same thing have happened if they were married?
It could, but divorce gives couples a legal way to manage those issues via divorce court. If you're not married and your fiancé wipes out your joint checking account and skips town, you're SOL legally speaking. But death or disability is also a possibility. Many federal student loans are forgiven upon death or disability, but if you're not married you wouldn't be liable for her debts in any event if she were to die tragically.

In general though, even if you aren't worried about any of the above, it still makes sense to me for her to continue to take out loans until you begin working at the very least. I've seen law firms renege on offers to young associates; anything can happen. It's fine to live off savings until you start getting paid, but not to pay her tuition out of said savings. It would be different if you had $50K in savings, but with such a relatively small buffer during quite a large transition (moving, new job, marriage), I would really err on the side of caution.

Also this may be way more advice than you have any interest in hearing, but please talk to your fiancé candidly about your family plans. I have so many high earning couples friends opt for the wife to stay home once they start having kids - many with MBAs and law degrees who only got a few years of income out of those careers before calling it quits. Most women claim they'll want to continue working when they have children, but many with high earning spouses such as yourself end up changing their minds because a) they can afford to and b) it's very stressful and expensive to juggle two ambitious careers plus raise small children. It would be a shame to pay six figures for a degree for your wife only for her to decide to stay home when you guys have a child because she "only" makes $75K or because she really wants to stay home.
The problem with that is if she punts on her education, and then he gets run over by a truck ten years from now, her earning potential will suck compared to what it would be if she finished her education. This is a problem in general, but even more if she has their kids to support.

Even if someone plans to be a stay at home parent, being educated/trained for a decent job is sound financial planning. The alternative courts financial catastrophe.

cherijoh
Posts: 4957
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: How to tackle fiancee's student loan debt

Post by cherijoh » Mon Mar 13, 2017 6:00 pm

Meg77 wrote:Also this may be way more advice than you have any interest in hearing, but please talk to your fiancé candidly about your family plans. I have so many high earning couples friends opt for the wife to stay home once they start having kids - many with MBAs and law degrees who only got a few years of income out of those careers before calling it quits. Most women claim they'll want to continue working when they have children, but many with high earning spouses such as yourself end up changing their minds because a) they can afford to and b) it's very stressful and expensive to juggle two ambitious careers plus raise small children. It would be a shame to pay six figures for a degree for your wife only for her to decide to stay home when you guys have a child because she "only" makes $75K or because she really wants to stay home.
A friend and her husband covered the majority of their daughter' vet school bills (after covering her undergraduate degree). She was engaged at the time and ended up getting married and having 4 kids in rapid succession. I think the daughter quit working after the birth of her second child. Daughter's husband is a lawyer, so she can afford to be a stay at home mom, but my friend and her husband are still paying off the HELOC as far as I know. :oops:

RoadHouseFan
Posts: 279
Joined: Sat Aug 13, 2016 6:55 pm

Re: How to tackle fiancee's student loan debt

Post by RoadHouseFan » Mon Mar 13, 2017 6:35 pm

Present her with a prenup and list of monthly expenses for her to pay.

inbox788
Posts: 5646
Joined: Thu Mar 15, 2012 5:24 pm

Re: How to tackle fiancee's student loan debt

Post by inbox788 » Mon Mar 13, 2017 7:44 pm

What state are you in? Is there a state tax deduction on the 529 plan? If so, be sure to take advantage of it.

http://www.finaid.org/savings/state529d ... l#loophole

mortfree
Posts: 1296
Joined: Mon Sep 12, 2016 7:06 pm

Re: How to tackle fiancee's student loan debt

Post by mortfree » Mon Mar 13, 2017 8:01 pm

The relationship concerns mentioned previously are real... of course you gave very limited information about the relationship status so everyone will assume the worst.

I would tell you to take a step back and take a deep breath...

You are just finishing up school and will be making money for the first time. You have the right mindset about debt and it is great that you will not have any student loans to worry about.

BUT you are just starting out too... You need to focus on your career and finances.

I would suggest that your fiancee continues to take out student loans to cover her school.

In the mean time, you should be saving as much as possible and not depleting your current cash to live. One day you will look back and laugh about how concerned you were about 60k of student loans (given your 180k starting salary).

So while you're stashing cash, saving for retirement, investing in taxable, saving up for a down payment on a house, etc you can earmark some of that for debt payoff once you're married. See, you do have to focus on your finances too.

for what's it worth: I would knock out the $6500 loan first b/c it is the lowest amount and it would annoy me having that low balance, then move on to the highest interest loan.

User avatar
snowshoes
Posts: 348
Joined: Tue Feb 03, 2015 12:33 pm

Re: How to tackle fiancee's student loan debt

Post by snowshoes » Mon Mar 13, 2017 8:05 pm

RedClay wrote: What do you think about this plan? I'm open to any suggestions or criticism. Thank you for your help!
Your not even married yet. Remember a Pre-nup! I'd suggest re-reading roadhousefans reply, again.
Last edited by snowshoes on Wed Mar 15, 2017 5:21 pm, edited 1 time in total.

RedClay
Posts: 33
Joined: Mon Mar 13, 2017 10:17 am

Re: How to tackle fiancee's student loan debt

Post by RedClay » Mon Mar 13, 2017 9:22 pm

Thanks for all of the responses. The majority of people seem to suggest that I forego paying any tuition until we get married. Instead, I should max out my tax-advantaged accounts and then start saving again in my taxable brokerage. Once we get married, we work out a payment plan for her debt. But won't this plan simply add interest expense and origination fees to the total amount that we will eventually pay off once we get married and she starts working? I will be saving in a taxable account while her debt piles up. The earnings from the taxable account (after tax of course) will then go to pay the interest expenses that have accrued. From a strictly financial point of view, won't we end up paying more by taking out loans over the next two years?

In response to some of the other points:

1. I understand that the ROI for her education is not good, but she made $30k at her old job (which she hated) and she likes the field she has chosen. The salary may also increase over time because the demand for her chosen field (gerontology) should be brisk. The diversification of having two incomes in law and health should also provide some income security in case I want/need to take a lower-paying job.

2. My fiancée also plans to work part-time (3-4 days per week) while our future children are young. This would allow her to keep her foot in the door while also spending more time with the hypothetical kids.

3. It occurs to me that my initial plan is extreme. I pay as much tuition as quickly as I can and then aggressively attack the debt. I will only have the tax-advantaged savings after I pay the debt. But the majority plan also seems extreme in the sense that I am saving parallel to her rising debt. Is there a middle ground where I pay some of her tuition so she avoids taking out high interest rate loans (6.3% interest rate, 4% origination fee)? She can take out $20k/year of federal unsubsidized loans at 5.3% and origination fee of 1%.

Thanks again for all of the feedback!

rob65
Posts: 334
Joined: Mon May 09, 2016 1:30 pm

Re: How to tackle fiancee's student loan debt

Post by rob65 » Mon Mar 13, 2017 9:44 pm

From a purely financial point of view, I would keep as much cash liquidity as you can until you've actually started work and gotten a few paychecks. A few months interest on the student loans won't make that much difference in the scheme of things and you can always pay down the student loans after you have started work, or even after both of you have started work.

Make sure she has researched all the various repayment options on the student loans. Does her desired future job qualify for one of the student loan forgiveness programs??

Not that you even asked about this in your original post, but I think your fiancee should finish her degree and maximize her career opportunities. No one knows what will happen in the future. If you have kids in the future, that will give the two of you the most options. Also, kids don't stay little forever and a stay-at-home mom or dad (sorry folks, but jeez its 2017) will probably want to go back to work at some point after the kids have started school.

And yes, you just wanted to know about a 6 month spending plan and I've got you married with four kids and house in the suburbs (a nice two story colonial on a cul-de-sac)... :happy

delamer
Posts: 6267
Joined: Tue Feb 08, 2011 6:13 pm

Re: How to tackle fiancee's student loan debt

Post by delamer » Mon Mar 13, 2017 9:54 pm

RedClay wrote:Thanks for all of the responses. The majority of people seem to suggest that I forego paying any tuition until we get married. Instead, I should max out my tax-advantaged accounts and then start saving again in my taxable brokerage. Once we get married, we work out a payment plan for her debt. But won't this plan simply add interest expense and origination fees to the total amount that we will eventually pay off once we get married and she starts working? I will be saving in a taxable account while her debt piles up. The earnings from the taxable account (after tax of course) will then go to pay the interest expenses that have accrued. From a strictly financial point of view, won't we end up paying more by taking out loans over the next two years?

In response to some of the other points:

1. I understand that the ROI for her education is not good, but she made $30k at her old job (which she hated) and she likes the field she has chosen. The salary may also increase over time because the demand for her chosen field (gerontology) should be brisk. The diversification of having two incomes in law and health should also provide some income security in case I want/need to take a lower-paying job.

2. My fiancée also plans to work part-time (3-4 days per week) while our future children are young. This would allow her to keep her foot in the door while also spending more time with the hypothetical kids.

3. It occurs to me that my initial plan is extreme. I pay as much tuition as quickly as I can and then aggressively attack the debt. I will only have the tax-advantaged savings after I pay the debt. But the majority plan also seems extreme in the sense that I am saving parallel to her rising debt. Is there a middle ground where I pay some of her tuition so she avoids taking out high interest rate loans (6.3% interest rate, 4% origination fee)? She can take out $20k/year of federal unsubsidized loans at 5.3% and origination fee of 1%.

Thanks again for all of the feedback!
You are defining what is "from a strictly financial point of view" based on everything going according to your future plans for you and your fiancee.

What some of us are saying is that interest rates and minimizing debt are not the only financial issues in your situation. Since things do not always go according to plan, it is better to let your fiancee be responsible for paying for her own education costs until you are married.

rob65
Posts: 334
Joined: Mon May 09, 2016 1:30 pm

Re: How to tackle fiancee's student loan debt

Post by rob65 » Mon Mar 13, 2017 10:10 pm

I would keep financial flexibility in the short term until you've actually started work and build up a little bigger cushion.

However, if you and your fiancee are in a long-term committed relationship and you want to help pay for her school, then help pay for her school. I'm clearly in the minority here on that viewpoint, but that's my opinion.

Edit: I think the middle ground in your post above makes sense: take out the student loans that have more favorable terms, but try to avoid the higher rate loans - particularly ones with high origination fees.

sawhorse
Posts: 3094
Joined: Sun Mar 01, 2015 7:05 pm

Re: How to tackle fiancee's student loan debt

Post by sawhorse » Tue Mar 14, 2017 3:25 am

rob65 wrote:From a purely financial point of view, I would keep as much cash liquidity as you can until you've actually started work and gotten a few paychecks. A few months interest on the student loans won't make that much difference in the scheme of things and you can always pay down the student loans after you have started work, or even after both of you have started work.
Definitely. It sounds like you're planning on having kids. If so, I think you absolutely need more money readily available for unexpected kid expenses of which there can be many.

For the people advocating a pre-nup, is there much point given that his assets are so low?
pangea33 wrote:
flyingbison wrote:
Jackbnimble wrote:I agree with the post above about not paying any expenses of your fiancé until you guys are married. I worked with a guy that supported his fiancé all the way through pharmacy school only for her to move on to someone else after she graduated.
Couldn't the same thing have happened if they were married?
There would at least be a legally-binding financial component if they were married.
I'm familiar with a case in which someone (I'm leaving gender out of this) paid for their spouse's business school. The student had an affair with a classmate and filed for divorce soon after graduation.

The jilted spouse would have been better off if they weren't married because they'd only have lost the tuition money. As it happened, they also lost a big chunk of their assets.

User avatar
bottlecap
Posts: 5855
Joined: Tue Mar 06, 2007 11:21 pm
Location: Tennessee

Re: How to tackle fiancee's student loan debt

Post by bottlecap » Tue Mar 14, 2017 6:49 am

Too much could happen in the next few years. From your post, I can't tell if you have a date set for the marriage.

I would make big plans to pay down the debt AFTER you are married. There is a big difference between saying "I agree to marry you" (fiancé) and standing up before your friends and family (and perhaps some Deity) and saying "I do". In the former situation it is a heck of a lot easier and far more socially acceptable to renege.

Plus, you both are young and young people are more likely to grow and or change your minds.

I would view the promise to marry as an inheritance in that you can't yet count on it. You can begin setting money aside now if you want, but there is no need to pay.

Why the rush?

JT

petulant
Posts: 349
Joined: Thu Sep 22, 2016 1:09 pm

Re: How to tackle fiancee's student loan debt

Post by petulant » Tue Mar 14, 2017 8:09 am

sawhorse wrote:
pangea33 wrote:
flyingbison wrote:
Jackbnimble wrote:I agree with the post above about not paying any expenses of your fiancé until you guys are married. I worked with a guy that supported his fiancé all the way through pharmacy school only for her to move on to someone else after she graduated.
Couldn't the same thing have happened if they were married?
There would at least be a legally-binding financial component if they were married.
I'm familiar with a case in which someone (I'm leaving gender out of this) paid for their spouse's business school. The student had an affair with a classmate and filed for divorce soon after graduation.

The jilted spouse would have been better off if they weren't married because they'd only have lost the tuition money. As it happened, they also lost a big chunk of their assets.
Yeah, it all depends on the situation. No marriage, no equitable division of assets or income; marriage, you get an equitable division. In most states, the equitable division is going to be 1/2 of the property acquired from spousal efforts while married. It may vary across jurisdictions, but the fact that one spouse paid for the other's education is going to be a major consideration for how remaining assets get doled out--one's walking away with a $50,000 piece of paper, so there's no way they're splitting the remaining $50,000 evenly.

The case you mentioned sounds like a preexisting marriage where the husband was the main breadwinner until the divorce. So yes, the couple's assets would be divisible between them, although if the jurisdiction's law were beneficial and the husband's attorney were skilled, the husband should have got credit for her walking away with a degree.

In OP's case, there probably won't be a huge chunk of divisible assets either way until years down the line. Holding off on helping her with school is less about the possibility of divorce than it is about making sure he's not spending tens of thousands of dollars on her until they're married. There's always a possibility divorce will happen after that, but there's also a likelihood the relationship falls apart during engagement.

To OP, I will just say that any additional cost of origination and interest for your fiancee to take out additional loans is a very small issue compared to the decision to spend tens of thousands of dollars in a fiancee's education.

User avatar
climber2020
Posts: 1097
Joined: Sun Mar 25, 2012 8:06 pm

Re: How to tackle fiancee's student loan debt

Post by climber2020 » Tue Mar 14, 2017 8:43 am

RedClay wrote: From a strictly financial point of view, won't we end up paying more by taking out loans over the next two years?
Probably. But this isn't a purely financial decision. Don't let your emotions cloud your judgment. Lots of stuff can happen, so wait until you're actually married. I was in a similar situation as yours, except I was already out of school for many years and making a nice income while my significant other was in grad school with loans. I did not touch those loans until after we were married, and I have no regrets waiting and letting a little interest build up. In the long run, it won't make a bit of difference in terms of when we'll be able to retire.

Don't be a fool.

Natsdoc
Posts: 64
Joined: Sun Jun 15, 2014 8:53 pm

Re: How to tackle fiancee's student loan debt

Post by Natsdoc » Wed Mar 15, 2017 11:13 am

From a slightly different perspective - I was the one coming into marriage with the student loan debt, my husband didn't have any.

I think the question of "should you pay fiancees loans/tuition bills" is different than "six month spending plan"

To answer the latter question - you don't have that much of a cash cushion for now - October when you start working. You indicate that you will move in June, but $1600/mo for two people isn't a lot, even in a low cost of living area, and you don't mention what the cost will be to move (it always costs more than you think!) and things like new suits for the job, etc.

I'd keep the cash on hand and keep taking out loans, at least until you actually start the job. Interest rates on the student loans are much lower than credit cards if your expenses turn out to be more than you expected or if you have a large unexpected expense between now and then.

Jack FFR1846
Posts: 7956
Joined: Tue Dec 31, 2013 7:05 am

Re: How to tackle fiancee's student loan debt

Post by Jack FFR1846 » Wed Mar 15, 2017 11:33 am

RedClay wrote:But won't this plan simply add interest expense and origination fees to the total amount that we will eventually pay off once we get married and she starts working?
The answer is "yes".

My added comment is "so what?".

They're her debts for the moment. If you get married this summer, then you can look at it very differently. Until then, they are her debts.
Bogle: Smart Beta is stupid

Post Reply