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My partner and I are trying our best to plan for the future and figure out how we will manage our finances in the coming years. They are currently about to begin their graduate studies for their field and will as a result be taking on a significant amount of student debt along with it. I am done with my studies and have had a software engineering job for about 6-months now, and it seems to be a stable position, making a decent amount of money.

As of right now, I have paid for rent, utilities and most all expenses that we have had for a little over 3 months since they have moved in to an apartment with me. This arrangement is fine to me, since I know that once their studies are complete they will contribute equally without question, and I am okay with investing this money into essentially funding their room and board for their education.

We are not married, but plan to be soon. This however raises an interesting question when we consider student loans. Whether we are married or not, the loans are going to be taken in my partner's name, not my own. I also am aware that once we are married, these loans in my partner's name, essentially become loans in our name. This is fine, but I want to help them with their loan payments as soon as I can.

I have seen in many places to never ever pay for your partner's debts unless you are married because you never know what will happen and it could bite you in the bum. Please assume in this example that there is no risk in this relationship, and that our marriage is inevitable, the question is only of when. (yes this is an unreasonable assumption but it's for the scope of the problem)

Here are my questions:

What makes the most sense in terms of efficiency of eliminating debt as well as keeping our finances understandable?

  1. To pay the student loans off as quickly as we can, meaning that I pay as much as I can towards them while my partner is in school and not able to pay themselves? (presumably best for debt elimination efficiency)

  2. To wait until after my partner is graduated to pay off these loans, so that we can both contribute to them after they have a job in their field? (presumably easier to track financially for equal payment, budgeting etc. Neither of us are super financially fluent)

More importantly:

Would this have tax complications for us, since they would not have income, and yet be paying on loans and tuition with this money from me and my job?

And: Does getting married solve this tax issue, if one exists?

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  • Do you not plan to mingle finances? What is the importance of having equal payment?
    – Hart CO
    Jul 30, 2021 at 21:02
  • @HartCO Psychological reasons mostly, guilt from my partner that I am paying for the majority of it if we don't pay equal. For the sake of example, assume that having a joint account is not possible, as I don't think that sorting out our feelings of guilt to make it feasible is necessarily a topic for a question on this SE site lol.
    – Flats
    Jul 30, 2021 at 21:10
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    The best way to eliminate debt, is to not acquire it in the first place! If you want to help your partner, then help them cash-flow their education and not take on any further debt.
    – Glen Yates
    Jul 30, 2021 at 21:11
  • @GlenYates Though this would be ideal of course, they have already been admitted, and without the graduate program (veterinary medicine) their undergraduate degrees are not nearly as useful, nor very good for job satisfaction in the field that it would place them in. Assume for the sake of argument, that this debt is inevitable and amounts to around $100k (so that it is significant enough to need a good plan in place for it)
    – Flats
    Jul 30, 2021 at 21:17
  • Well, a veterinary degree usually takes 4 years, so for $100,000, that's $25k per year. You say you have good income from software engineering, partner could work part time, or during summer break. Budget well, eat rice and beans, you should be able to do it.
    – Glen Yates
    Jul 30, 2021 at 21:24

2 Answers 2

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The more of, and sooner that you pay off a loan, the fiscally better off you are. That's basic math.

If your SO's SLs are:

  1. Federal then they might (since I'm not an expert in Student Loans) not be accruing interest. If that's the case, then the mathematically prudent thing to do it to make monthly SL "payments" into a so-called High Yield savings account at a bank like Ally where it'll accumulate some interest. Then make a big lump sum payment when the loans do start accruing interest.
  2. Private, then they're probably accruing interest now, which means that you should start paying it now.

Just as important is The Dreaded Budget. Which is really quite simple, because it's just a list of:

  1. incoming money and
  2. outgoing money.

That's it, nothing more. Add up the two columns, and make sure the incoming is greater than the outgoing (which is called Living Below Your Means). The difference should go towards :

  1. building a small nest egg (aka $1000 initial emergency fund), and
  2. pay off debt, high rates first.

If you're smart enough to write computer programs, you're smart enough to use a spreadsheet to track your checking account, and all expenditures.

Crucial is that both of you MUST be on the same page regarding living below your means.

Corollary to Living Below Your Means is living modestly: no new expensive car, expensive clothes, overly-expensive house, etc until you're high net worth. (That does not mean "live stingy".)

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  • Much appreciated! What would you say is the difference in living below our means, living modestly and living stingy (specifically this last one)? What exactly constitutes "high net worth?"
    – Flats
    Jul 30, 2021 at 21:39
  • @Flats both "living modestly" and "living stingy" are subsets of "living below your means"; the very definitions of modesty and stingy are all you need to know.
    – RonJohn
    Jul 30, 2021 at 21:44
  • @Flats as for the definition of high net worth, like with pornography... you'll know it when you see it. For example, would making a $25K cash auto down payment put a noticeable and painful dent in your liquid assets? If so, then you aren't high net worth.
    – RonJohn
    Jul 30, 2021 at 21:48
  • @Flats regarding modesty and stinginess, their connotations are just as important.
    – RonJohn
    Jul 30, 2021 at 21:49
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This depends a lot on the details of the student loan.

If the loan doesn't start incurring interest until after graduation, you should NOT pay it of while your partner is in school. Instead save and invest whatever you can spare.

If the loan does accrue interest from day one, it becomes a bit of math problem. You can compare the interest rate of your loan to potential tax savings down the road. These again depend how you are planning to file your taxes (joined or separate) and what income bracket you are expecting to be in.

It may be worth setting up a spread sheet that models multiple different scenarios for your specific details and see which version do you like better. Some scenarios will pay of faster and others may minimize the total amount paid, but these may not be the same.

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  • Thanks for the insight! What might the tax implications (costs/savings) consist of? Would the tax implications be changed by our marriage status? I have only ever had to really account for a W2 on my taxes and my partner is the same way. Would it complicate things on our taxes when they come due?
    – Flats
    Jul 30, 2021 at 21:37

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