Ugh, Your Spouse Has Debt Too?

If one person has debt, that’s bad enough, but two? You can feel like you’re drowning in a sea of neverending payments that seem like they’re barely making a dent. Here are some of my suggetions for digging yourself out of debt.

One of the benefits of running this site has been getting to know you and the many other regular readers. I’ve learned that everyone’s situation is unique, even if the general principles of good financial health apply across the board.

One common theme I’ve seen is that people start thinking about finances at different points in their lives. Some start during law school, while others have been practicing for several years before they decide to get everything in order.

It seems the ones that are forced to confront money issues sooner rather than later are those married to a spouse that also has debt. Sometimes we think that only lawyers are struggling with the student loan debt monster, but it’s a rare modern couple that isn’t battling debt on two fronts.

So, if you think $200K of student loan debt is bad, how about $350K in combined debt? What about $450K? Or $600K?

I recently corresponded with one such reader from the Pacific Northwest that has a combined debt load of about $350K between the two (one is a lawyer the other is not).

They have a healthy combined income of about $125K but with a debt balance of nearly 3x their income and interest rates in the 6.8% range, it’s difficult to make progress (interest at that level is about $24K/year or $2K a month even before you touch the principal balance).

So what is a couple like this to do? Here are a few of my ideas.

It’s time to think different

Remember the Think Different Apple campaign from the late 90s?

Yes, if you have $350K in student loan debt, it’s time for you to think different too. And thinking about buying Apple products is probably not the way to go here.

Not only are you broke, you’re $350K away from broke. This is a huge problem that will take you years to get back to zero. Yet, getting back to zero you must, whether that’s repayment or forgiveness.

Realizing that you owe so much doesn’t have to be a depressing experience (although it usually is). It just means acknowledging the facts of the situation and deciding to take action.

Because once you start to conceptualize that you’re absolutely broke, you’ll also realize that you’re in no position to do a lot of things like (1) buy a house; (2) help out family members; (3) live in a high cost-of-living location or (4) live in a certain way because “you’re at that stage in life”.

All of those things go out the window when you decide you want to solve this problem as soon as possible.

The good news is that if you’re reading this post, your mindset is probably 95% of the way there. It’s just the unpleasant thought of paying off the debt that lingers (don’t worry, we’ve all been there).

Now is the time to develop a plan.

The plan is to pay off your student loan debt.

Public student loan forgiveness

PSLF is getting a lot of press lately, with many wondering if they qualify for PSLF or whether PSLF will go away. Despite the concern over the program, it would be silly not to consider PSLF as a possible solution to the debt.

If one or the other has the opportunity to work for the government or a 501(c)(3) organization, PSLF could provide non-taxable forgiveness in 10 years. If one spouse has the bulk of the debt, it may be beneficial for that spouse to find work that qualifies for PSLF while refinancing the other portion to pay it off quickly.

I like to use a back-of-the-envelope calculation to consider whether a PSLF-eligible job is “worth it”. Let’s say one spouse has $200K in student loan debt and is considering taking a paycut to work at a PSLF-eligible job.

Since the $200K will be forgiven in 10 years, one way to compare the PSLF-eligible job with a non-PSLF job would be to divided $200K by 10 years to get the roughly $20K in “benefit” you’ll receive annually from the PSLF-eligible job.

Of course that money essentially comes to you tax free, so you’d probably need closer to $30K in extra pre-tax income to equal the $20K in benefit you receive from the PSLF program.

So with $200K of debt, 10 years left on the program and deciding between two jobs where the PSLF-eligible job pays $70K and the non-PSLF job pays $100K, you might roughly consider them equal. Of course, there are better tools out there to compare the value of PSLF, such as this calculator. (Ed Note: The creator of that calculator, Travis at Student Loan Planner, is a paid sponsor of the site but his spreadsheet is free and a truly helpful tool for comparing the different repayment options.)

The point is that it’s absolutely possible to quantify the value of PSLF so that you can make good decisions about whether the PSLF job is “worth it”, particularly if you’ll take a salary cut.

Increase income

If counting on a government program to perform as expected isn’t your preferred approach, there’s always the possibility of taking control of the situation yourself.

To do that, there’s only so much defense you can accomplish by reducing expenses. You’ll probably get a lot more value out of working to increase your income.

Thankfully, there’s a lot you can do. Some of the ways to boost income are short term (like renting a room on AirBnB or starting a side hustle). Just look at what this lawyer has accomplished by picking up a few side hustles. Could you do that? Of course you could!

Some of the ways to boost income take more time, like switching jobs or finding a more lucrative practice area. It’s still a great idea to plant these seeds today because tomorrow will come sooner than you think.

Sometimes the best way to increase your income is to switch jobs. Don’t be afraid of sending out your resume and going on a few interviews to test the market and see what else is out there. You can get all the way up to the point of receiving a job offer and still say no. There’s no harm in exploring.

All-out warfare

The great thing about $125K in income and $350K in debt is that it’s not an insurmountable problem.

What if they wanted to get rid of the debt in 4-5 years. Could they do it?

If you said “NO!”, that’s the wrong attitude! You may not want to give up the creature comforts (who would?), but don’t forget that all-out warfare on the student loan debt is perfectly possible.

This doesn’t mean a gradual adjustment where you slowly reduce expenses and throw an extra $1000/month towards the debt. All-out warfare is a radical lifestyle change.

A couple with this much debt could:

  • Refinance their student loans
  • Move back in with parents
  • Pick up side income (adjunct teaching, Uber, Postmates, etc.)
  • Cut expenses to the bone (goodbye eating out, smartphones, traveling)

With TWO people working together to eliminate the debt, there are a lot of options to make serious headway on the debt while keeping each other motivated.

You wouldn’t be alone either. There are couples living on $14,000 a year. I certainly would find that too extreme, but sometimes people forget that all-out warfare is an option. If you really want to get out of debt, what’s a couple of years of living on the bare minimum? You might even find that you like it when you get rid of your stuff.

And what happens if after 18 months you decide you’re tired of this approach and need to change up your strategy? Well, maybe you’ve paid off $150K and are now only staring down $200K of debt. That’s hardly a bad position to be in.

Joshua Holt is a former private equity M&A lawyer and the creator of Biglaw Investor. Josh couldn’t find a place where lawyers were talking about money, so he created it himself. He is always negotiating better student loan refinancing bonuses for readers of the site.

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    Six thoughts on Ugh, Your Spouse Has Debt Too?

    1. I’m never quite sure what to say to someone who has that much debt. No matter what, it takes income to pay off debt. The key I think for someone with that much debt is to live like a student for as long as they can and just keep getting that income up. It’s going to take a long time to pay off 350k on 125k income, no matter how simply you’re able to live. You need to get that income up.

      I’m not a PSLF expert by any means but it seems like a more favorable option for folks who don’t have the option of biglaw and have a ton of debt.

      I’m not a huge fan of the idea of having to work in one sector for 10 years (ten years seems like such a long time), but if you can’t get biglaw for a variety of reasons (grades weren’t good enough, school wasn’t good enough, bad at interviewing, don’t want to work those horrible hours, etc), I’d say PSLF might be the only way to go to get rid of a high six figure debt.

      PS. Thanks for the shoutout!

    2. I have no idea what I’d do with $350k in student debt. I’m at $260k in mortgage debt, and I feel like that’s a lot of money!

      Right now, I’m focusing on picking up a few side hustles like Financial Panther. This will increase my passive income and allow me to free up more money for paying down debts.

    3. I married into student loan debt to the tune of about 90k. It felt so daunting at the time, but after chipping away at if for years, we started making real progress as our careers advanced. As you said having 6 figures of student loan debt is going to force you to address the problem. Having a high income will certainly help, but persistence is key.

      As much as I hated paying on our debts, it was amazing to pay them off. An added side benefit was we had already developed some healthy money habits that have helped us build our net worth now that we’re debt free.

    4. I’ve seen a couple with over $1.5 million together. I’ve worked with multiple individuals with close to $1 million of debt. The amounts people owe together can truly be staggering. At a point where the debt to income ratio is beyond 3, I typically view the federal programs as the way to go both to maximize financial return and to have cash flow available for other things.

    5. Thanks for this post; I’m late to the party, I just happened across your website this month and wished I’d found it sooner. I definitely made some stupid money decisions earlier in my career (let’s just say I’ve paid a lot of “tuition”). My husband and I got married a month after we both took the bar in 2013. At that time we probably had about $450k combined student loan debt; I went straight into biglaw and he clerked for two years before joining me in biglaw. It wasn’t until May 2016 that we had the “a-ha” moment and really changed our thinking about our student loan debt (I was going back to work after maternity leave when our son was five months old and we realized that even though we were both biglaw associates we were going to struggle to pay our bills for the first time because childcare was so shockingly expensive) and realized the debt was an emergency and we were broke. We’d never thought of our debt as an emergency before; I just thought it was something we had to manage until 15 years or so down the line when we would pay it off after making minimum payments every month. We only paid attention to our salaries and we thought it was totally normal to have a negative net worth. At that time our debt was still ~$430K somehow even after practicing for over two years and making monthly payments. We both re-refinanced our debt at that point in May 2016. My loan balance at that time was $196K and his was $235k. I devoured everything I could find on the internet about debt repayment through frugality (MMM changed my life, also sixfiguresunder and nomoreharvarddebt) and am proud to say that we just paid off my loan in full (we follow a debt snowball model so every extra cent we could find went to paying down my debt) less than two years after our “a-ha” moment. My husband’s loan balance is down to $188K and we anticipate paying it off in a year. It really does take a mindset shift – from feeling flush to feeling like your debt is an emergency and you can’t afford so much as a cortado until you pay it off. We had to be willing to be a weirdo. Our co-workers, family and friends sometimes don’t seem to understand us and the choices we make sometimes. But it is worth it. I really like MMM’s principle of constant optimization; we are always looking for new strategies with our money and debt repayment.

      1. Thanks for the comment S. You are hardly alone. I think many have just assumed that this debt load is normal and similar to the burden of previous generations (news flash: it’s not). Glad to hear that you had a life-changing moment a couple of years ago and CONGRATULATIONS are in order for paying off your debt. Paying off another $188K in a year is also some hardcore financial awesomeness. Can’t wait for you to join the debt-free crew.

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