Marriage and Debt!

[Anonymous]

Good info CreditMizer, thanks. I wasn't aware that interest on student loans was tax deductable. That'll be really handy.

I have a question though. If she hadn't deducted the interest in previous years, can she go back and deduct it now that we know it's deductable?

You're also very right on getting more out of an investment instead of paying more on a student loan.

Thanks for the good info,

Mike

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CreditMizer wrote:
$40K in CC debt @ CC interest rates with no assets to show for is BAD DEBT.

$35K in student loans is not bad. First thing like interest is 4%-6% depending on when she went to school. Second it is TAX DEDUCTIBLE. So if you are in the 25% braket you "get back" 1/4 of the interest you pay. This makes the effective interest rate more like 3%-4%.

I would recommend have you and future wife work out a plan to payoff the CC debt and she will need to learn to live within budget to avoid relying on the plastic.

There is no reason to pay student loans off early. Make payments on time and in full. Invest any extra money. Since after tax rate on student loans is 3%-4% is you have a higher return in investments it helps your net worth more to invest instead of paying down the debt.

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[Anonymous]

Absolutely. She didn't go into this thinking "oh well let's just BK, screw it all." She didn't like the idea, but she would have "taken one for the team" if it was the right move to do for the two of us. From what I'm learning from everyone here is that BK is not the answer at all.

Thanks,

Mike

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dr0265 wrote:

I sure hope the poor woman does not read this thread....

Mike said, "If the ugliness of a BK on her is the answer to that then she was willing to go with it."  Note that it was not something she wanted to do, just something she was WILLING to do if it was in the best interest of their future financial standing.   They decided that THEY wanted to have children sooner than later and that she would PROBABLY stay home.  Seems this poor woman is being found guilty of a lack of financial integrity before all information is read or known. 

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[Anonymous]

Mike I don't know if she can go back and ammend now, but it's worth a shot, it's not going to make you millionaires but it might be nice to get the money back.

It surprised me she didn't know that already (well I should add, she has to have been paying them, if they've been deferred then she hasn't paid any interest and it can't be deducted).

In late Jan she'll get a statement that says how much in interest she paid in.

[Anonymous]

More good info caliborne. I don't know how student loans work, or whether or not they collect intrest while in deferment. But yea, they have been deferred since she left school. It's definitely something to look into though. Also, she had no clue (like myself) that the interest was deductable. I guess it's one of the many reasons I stick around these forums. To learn this stuff!

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caliborne wrote:
Mike I don't know if she can go back and ammend now, but it's worth a shot, it's not going to make you millionaires but it might be nice to get the money back.

It surprised me she didn't know that already (well I should add, she has to have been paying them, if they've been deferred then she hasn't paid any interest and it can't be deducted).

In late Jan she'll get a statement that says how much in interest she paid in.

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[Anonymous]

Mike, she can only deduct interest she acutally pays. So once they start being paid back a percentage of the amount she pays in interest will be tax deductible, assuming that she/you don't make too much money. (im' not sure where they number is)

[athensguy]

You can also pre-pay interest on the SLs. She should be getting statements that say what sort of interest she has accrued so far on the unsubsidized loans, if she has any of that type.

[braznyc]

Hi Mike, I pay the interest on my UNSUBSIDIZED SL now that they're in deferment because these types of SL accrue interest and is just waiting for you. This does affect your credit score, because before Citibank reported the DECREASE in my balance they reported the bal + interest and my CR had me at 101% debt to income silly but I didn't like it then, it's all peas and carrots now. I would strongly suggest if your fiance has any unsub SL to pay the interest now.

You've been given some really good advice, especially about SL can't be BK it's very hard to do this now. I'm not sure if I read this but maybe she can take a part-time job over the summer to pay off her cc debt, that's what I'd do. I know it's not easy being a full time student and all, but I work and go to school full time (grad school). Good luck to you both.

[Artzdelux]

First congrats!

My fiance is in somewhat of the same shape with CC debt, but also has much more in the form of student loans (she financed undergrad and grad school through them).  She is still in school, but we are starting to look now at how to approach/ target the debt until she gets out and gets her big pay increase with her degree.  It is a hard situation, to talk about money to anyone, but if your relationship is going to be successful long term, you have to be able to.

I am not sure if you should start considering starting a family until you have had these types of converstations...children are a huge drain on resources, and you definitely need a financial plan to approach parenthood prior to becoming a parent IMHO.  We have had discussions, and neither one of us wants our child(ren) to grow up in day care, so when the time comes we are going to seriously talk about what we can afford and do whatever is necessary so at least one parent can be home at all times to take care of the child(ren). 

Not saying that is what you should/ need in your case, but preplanning and discussion never hurts.

[Anonymous]

i hope i don't sound to preachy as no one is perfect including myself.  however, there are two things really bothering me and feel free to tell me to shut up after i say this.

i would NEVER marry someone without a job.  love is grand, but it doesn't always last forever.  i don't know why she isn't working and it probably isn't my business, but that's how i feel about it.  you want things, you spend money, you work for it.

i would NEVER have kids while i was in so much unmanageable debt i was considering bankruptcy.  that's just stupid and, in my opinion, akin to child abuse.  babies are expensive.  having a child before debt is paid is just asking for more trouble.  people need to think first.  if you can't or don't have a plan to educate that child so it has a decent chance in the world, don't have it.  planning a child while deep in debt and not working, therefore not guaranteeing a full belly at all times for that baby is wrong.  sure, accidents, illness and job loss happens, but why bring a baby in the mix when you're already uncertain about yourselves?  doesn't seem fair to me.

anyway, i'm off my soap box.  good luck to you

[Anonymous]

I have to agree with katecrime. I read this thread and kept thinking to myself: "Why would you marry someone who does not want to AND does not have a job?"

She brings in $40,000 in debt and already talking about having kids soon.

Yes! It is a huge financial decision to have kids. Not to mention that getting pregnant does not necessary happen overnight. She should insist herself that she finds a job and helps with the debt. Even if she just brings in $300 per week. That's $15,600 a year ($300 x 52 weeks). Half of her debt.

There should be no hurry to have children. You're not even married yet! Live a little together. Have fun and figure out if you two are right for each other. Putting off having kids for a couple of years should not be a deal breaker here. If it is then maybe you shouldn't marry.

You two will be so much better off having your first child debt free, maybe even with some money in the bank.

I wish you both the best! Marriage is a lot work and responsibility, especially with kids. But it's sooo worth it if you're ready for it both mentally and financially!