Sure transparency for the couple, but parents don’t need to know the ins and outs of the soon to be married couple’s finances.
I think it is important to discuss the ramification of bringing debt into a relationship. The couple does need to talk about it, how to handle it, and the toll it will take on their marriage. I would only be involved in that conversation as it concerns my child. It would be up to them to share ideas and information with their future spouses. I don’t have a child in this situation but I am curious what happens when a couple marries and one brings significant student loan debt. Does that debt stay with the other spouse in case of a divorce?
If the debt was incurred before marriage, in case of divorce the debt would stay with the person who came in with the debt. If the loans were taken out while married, at some community property states both parties may be on the hook.
D1’s fiancée had 1/3 of student loans still outstanding few months ago. They plan on buying an apartment soon after they are married. They want their credit report as clean as possible and able to qualify for the mortgage they want. D1 decided to loan him the money to pay it off.
My understanding is that student debt (Federal at least) belongs to the person who incurred it - it is one of the debts that does not convey over to the spouse. My son had a work friend who’s son married a girl with huge unpaid student debt that he did not know about. When they filed a joint return his quite large refund (about $7,000 if I recall) was garnished to pay toward the delinquent student loan. Son asked me about it and I suggested the friend’s son file a request for innocent spouse relief. He did and with proof that the refund was based on his earnings and that the debt was not his he did get the money back.
No idea how the marriage fared - I would be pretty upset to have been blindsided like that and not to have known about the delinquent debt before the marriage, but that is just me!
No one should get married without knowing the other person’s credit score. 
Debt is always separate if incurred before marriage, unless it is co-mingled after the marriage. If one party owns a house with a mortgage, some of the increase in value may belong to the spouse after marriage but the debt won’t.
That doesn’t mean the debt won’t impact the spouse who didn’t sign for the debt as in the example of the tax refund, garnishing a joint bank account, repo-ing the car that is titled in the debtor’s name but used by both spouses.
I don’t disagree with that oldfort My #2 kid is 25 now and he just bought a house by himself, but he’s had at least 4 friends 'buy houses this year with partners or spouses and I’m sure if the conversations hadn’t occurred before around debt and credit scores they certainly did sitting at the bank with the mortgage officer. In my son’s case he said it actually spurred a conversation about credit scores and how they (that group of friends) were all slightly different…even at age 25 and less than a handful of years out of college. Ironically the ones who had a car loan for a new vehicle had slightly higher credit scores than my son who had no prior loans other than Federal Direct on his credit report. And his score jumped up significantly after owning his home and that huge debt about 6 months. As my 25 year old says “It’s a screwed up world when the person with the most debt gets the highest credit score.”
I remember that previous thread, @alh. DS#1 was engaged at the time. Neither he nor now wife had any debt. Now fast forward- DS#2 has no debt but is fiancee has grad school loans. He has offered to help her pay them off, but from what little I hear (and I dont ask) she is working hard to pay hers off. I like that attitude.
i know that when D was dating, a common question was did she have school debt?
I know that she and bf have discussed their credit scores.
D and bf are going on a vacation together. She paid for the vacation on her credit card and he wrote her a check. It was a win for her, she got reward points plus it upped her credit score. D was quite pleased with herself. When it came time to put an additional charge on the vacation, he put that on his credit card. ;). Neither carry any debt other than auto and house.
This sounds like a good idea. But having student loans doesn’t ruin your credit as long as you make your payments on time (or earlier).
My daughter and her husband bought a house a couple of months before they got married. At that time, she was still in the process of paying off her student loans from business school. She had always made her payments on time and had even paid off some of her loans early. Her credit score was high enough so that they had no trouble getting a mortgage.
Debt to loan ratio is important when it comes to getting a mortgage. That’s why D1 didn’t want her fiancé student loans on his credit report.
There is good debt and bad debt.
Student loans, and mortgages, are both very good debt. Credit card debt is usually considered bad debt.
Good debt is typically incurred by more responsible people, with a higher likelihood to be paid back. Student loans usually mean the borrower will have a higher income and therefore ability to pay it back. Mortgages have an asset that the lender can take if the debt is not repaid.
If the parent has properly raised them, their children should understand this before getting married. If the parent is concerned that they have not raised their child properly and really wants to give unsolicited advice on their future daughter-in-law’s student loans and implications of their tax filing status, the parent should start off by saying something like the following:
“I know this is none of my business, so feel free to tell me so, but its been forever since your father and I had our own student loans and the rules have probably changed, but I am a mom and therefore a worrier, so I was wondering have you figured out what the best way to handle ____'s student loans?”
I think this is a little harsh, @3puppies. If the issue of debt didn’t come up during the young person’s growing-up years, it simply may not have been discussed. We can’t all cover every possible aspect of adulthood in our conversations with our children during the few years that we have them.
My daughter’s husband comes from a family that is quite affluent. I doubt anyone in his family borrowed money for any purpose when he was growing up. And because borrowing most likely never happened, it may never have been discussed. That doesn’t make his parents bad parents.
Lenders do not look at good debt vs bad debt, debt is debt. They care about total debt to income ratio. If I remember correctly total debt can’t be more than 35% of total gross income and mortgage payment can’t be more than ~28% of gross (the % changes from time to time). In my previous post, I meant debt to income ratio.
Not really. There are different types of debt - revolving credit, mortgage loans, auto loans, leases - and they all have a different way to earn points toward your credit score. You can have a credit score of 810 just by paying your credit cards monthly, but that’s not going to get you a mortgage if you don’t have the income to debt ratio and if you have maxed out your credit cards (but pay them all on time). That income to debt ratio is very important and if you are already paying more than 50% of your take home pay to existing debt you are going to have a hard time qualifying for a large mortgage. Lenders do look at the type of debt but more in the concept of the terms of the debt. If you have a student loan at 7%, than might be better than the same amount on a credit card at 15% but not as good as a car loan at 7% for fewer years. Plus the secured car loan is going to look better than the unsecured student loan.
If you are concerned, perhaps a gift for the young couple of a few hours with a financial planner or financial counselor would keep the privacy of the future child in law, while giving the young couple some solid advice and a jumping off point for their discussions.