Attending college, especially for a secondary degree, is something that most people look forward to doing (and saving up for…) for years, if not decades. A college degree holds a myriad of benefits like job stability, career satisfaction, and more. However, as the student loan debt total in America now hovers around $1.6 trillion, it has become increasingly clear that a quality education will indeed cost you. While some students are fortunate enough to have financial assistance from their parents to cover some or even all of their educational expenses, the vast majority do not: 65% of undergraduate students still graduate with student loan debt, at an average of just over $35,000 in federal loans per person (not to mention private loans).
When it comes to secondary degrees, tuition fees can waiver significantly depending on both the institution, as well as the degree being pursued. The average cost of a master’s degree in the United States ranges from $30,000 – $120,000. Meanwhile, securing a doctoral degree (PhD) results in tuition expenses of $30,000 per year on average. Because the degree typically takes just over eight years to complete, the total cost is usually about $240,000, or just north of a quarter of a million dollars, depending on what the cost of materials and living expenses add up to. Of course, dollars and cents isn’t everything when it comes to pursuing something in life. The opportunities that a secondary degree can open up may be limitless. For someone determined to become a professor or knowledge expert in a specific field of the arts or history, a PhD may be the only way to practice what they are genuinely passionate about. While you shouldn’t necessarily let high tuition costs completely squelch your dreams of pursuing a secondary degree, being aware of the potential costs can help you make more intelligent and more informed decisions about your future.
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In addition to seeking out financial aid for school in the form of scholarships and grants, there are additional ways you can be proactive about your finances should you decide to take on student debt while pursuing a secondary degree. A famous trick for homeowners is to take out a home equity loan which they can then use to pay for school. Home equity loans have some of the lowest interest rates on the market, especially student loans or personal loans. As is the case for any loan that you take out, though, it’s wisest to do your due diligence before signing off. Look at the salary estimate for those with your degree, and calculate your loan repayment options. If paying back your loan will eat up a massive part of your salary for 20 years after you graduate, you may want to explore other universities or opportunities.
Your Student Debt Can Affect When and If you Say “I Do”
While it’s true that nobody can ever take your education away from you, student loan debt can indeed affect your financial situation for years to come, and that includes once it comes time to say, “I do.” The average age that individuals (outside of graduate school) get married continues to increase, so does the average age of graduate students. The majority of men and women in the United States are getting married in their late 20s on average. Still, the average master’s degree student is around 33 years old, and the typical doctoral student a bit older still. With both of these ages rising in sync, it is almost definite that student loans due to your undergrad or graduate education will impact your finances either when you get engaged or during a marriage. Not only will this debt place a practical limit on financial spending until paid off, but it will also likely be a topic of discussion with your future spouse, should you choose to get married. Do you both have student debt, or do you hold the majority of the debt and the other the majority of the savings? How will this student debt affect family finances, like paying the mortgage, saving for family purchases, or spending a vacation? It is essential to discuss these decision points and come to a conclusion before getting married. One great way to facilitate this conversation, and ensure that student debt does not become a financial burden in your relationship, is to create a prenuptial agreement.
A Prenuptial Agreement Can Protect You and Your Future Spouse from Student Debt
A prenuptial agreement or “prenup” must be created and signed before your wedding and is a simple and effective way to ensure clear communication and agreement around issues like finances, including student loan debt. Before you shrug off the thought of a prenup due to some of the stigma that you may have heard surrounding the concept, take a moment to explore just how beneficial these marriage contracts can be and why they continue to increase in popularity (increasing 500% in just the last 20 years!) You can think of a prenup as a predetermined agreement on how assets will be divided up/protected should your marriage ever end in divorce. A prenup can allow you to rest easier knowing that you are covered in the worst-case scenario for your marriage. It’s logical to contemplate the idea of marriage, and prenups, like a business strategy. After all, any business-minded person will tell you that it’s simply inadvisable to start any sort of venture without an exit strategy. Sure, it may not be incredibly romantic to think of your marriage as a business, but after all, it is a contract that you are signing to stick things out through thick and thin. If you went in on a business venture or investment with someone, you would ensure that you had a contract in place to clarify what would happen at the dissolution of said business. A prenup is simply a business plan or insurance plan for you (and your current/future family) to protect your financial stability if something unexpected happens later.
There are two main reasons that prenups have grown increasingly popular: divorce rates and an increase in financial assets. Though the divorce rate has been steadily declining since the mid-1980s, as of 2008, about 40% of marriages still end in divorce. Additionally, many millennials who are getting engaged now grew up with divorced parents, and therefore are extra wary of the possibility. The second reasoning for an uptick in prenups tracks back to what we said earlier regarding the increase in the average age of marriage. As people get married later in life, they are entering marriage with the potential for greater assets, as well as debt, than if they had gotten married at a younger age.
While you may have assets like property or inheritance to protect, a prenup can also protect you from inheriting the burden of your spouse’s student loan debt. To fully understand the intricacies of the protection that a prenup can offer, it is vital to understand the difference between what a court will classify as a marital or non-marital asset if you did not have a prenup in place. These definitions will vary from state to state, but typically marital assets are defined as debt or property acquired throughout the marriage. This categorization can differ depending on whether your state is an “equitable division” or “community property” state. During a divorce, property that is considered a marital asset can be divided between (not necessarily equally) or granted to either spouse, depending on state law or by determination of the court. On the other hand, “non-marital assets” are debts, properties, etc., that were owned by an individual spouse before the marriage and likely remained under the ownership of the individual throughout the wedding.
Even if you are currently engaged and your future spouse does not have a concerning amount of undergraduate debt, if they plan to earn another degree, that could quickly change. Not only can a prenup protect you financially from winding up with the burden of a spouse’s pre-existing debt, but you can easily add a clause to protect yourself from future student loan debt that your spouse may incur, should they decide to go on to a master’s or doctoral program. After all, if they incur this debt during the marriage, it could be considered a marital asset, heightening the chance that you will be responsible for it in the case of a divorce.
So, how easy is creating a prenup anyway? Well, there are a few ways to go about this. One way is for you and your future spouse to hire an attorney to discuss and negotiate the terms of your prenuptial agreement. This can cost anywhere from $1,200 to $5,000 per spouse, depending on where you live and the attorney you hire. Alternatively, there is an online option for creating a prenup called HelloPrenup. HelloPrenup.com allows users to create a prenuptial agreement online for $599 per couple and negotiate the terms amongst themselves without lawyers. Of course, with this option, you can always consult a lawyer on the draft prenup before signing, which may keep the overall cost down significantly.
Contrary to what you may have previously heard about prenups spelling out the forecast for a doomed marriage, they can have quite the opposite effect. Prenups lay out the groundwork for money to be a common conversation point in your relationship, which has massive benefits for marriages. 54% of couples in “great” marriages talk about money with their spouse daily or weekly, while only 29% of those in “okay” or “in crisis” marriages can say the same. Having an open pathway for discussion about money can positively impact health and longevity, including student loan debt. After all, 13% of divorcees with student loan debt said that outstanding student debt contributed to the breakdown of their marriage. Working together to succeed in financial wellness promotes trust and transparency for couples and makes them stronger.
In addition to protecting against the acquisition of a spouse’s student loan debt, there are other ways that a prenup can help to save a spouse with fewer assets. Couples may choose to include a clause in their prenup that mandates joint bank accounts so that they can work on their financial goals together. You can even detail which bank you would specifically like to use, as well as what portion of each individual’s income gets deposited in the account. How financial gifts are split up can also be clarified within a prenup, whether you want to ensure these gifts remain the separate property or make their joint property share the wealth in your relationship.
Education and marital relationships are both invaluable things in life that can open the pathway to years of happiness and opportunity. Prenups serve as an easy tool to help protect these circumstances and set you up for financial and marital success.