I've been with my boyfriend for a year, and he's a great guy. The only thing is, he just told me that he has $30,000 in credit card debt from when he was in college. Add to that his $25,000 student loan debt, and he's $55,000 in the hole! We've talked about marriage, but I don't know that I'm ready to saddle that kind of debt. I have student loan debt, but I've never let my card debt get out of control like that, so I don't really understand where he's coming from. I'm not really sure what to do… help him out or cut my losses. It obviously bothers him, so I know he wants to fix this. I just don't know how to help him. Any advice you can give would be great.
Dear Sarah Beth,
Don't switch your relationship status to single just yet. Yes, your boyfriend is in the hole, and I can see how that is scary if you're thinking long-term, but it's a common and solvable problem.
For perspective, here's some context. According to
The Project on Student Debt, a higher education advocacy organization, 2012's graduating college seniors owed an average $29,400 in student loans. Because tuition and other expenses are often so costly, many also used credit cards to supplement what they earned and borrowed while they were working toward a degree. Though it's on the high side, $30,000 in consumer debt is not unheard of.
Nonetheless, he does need to pay it down, and it sounds like he's interested in doing just that. To do so, his first step is to arrange his debts in proper order. Federally granted student loans come with low interest rates (typically 3 to 4 percent) and long repayment terms, with 10 years being the standard. When distributing funds, they take less priority than what's on the credit cards because the cards' rates can be five times higher. On cards, interest compounds, so finance charges are added to a bill already bloated with finance charges. That means that when you're paying them down, the student loans ought to get the minimum required payment, while the credit card debts should get the minimum plus any extra cash that's available.
Now for the plan. He should keep to his student loan payment (around $250 for a balance such as his) and commit all available funds to the remaining obligations. To develop a budget, he needs to subtract basic expenses plus the student loan payment from income, and what's left over is his fixed monthly credit card debt payment.
In a perfect world, he would pay off this account in a few months, but that's unrealistic. As a recent graduate, he may not be making a lot of money (yet). However, if he can manage to send a grand to his credit card companies every month, he'll be at a zero balance in just over three years. That's assuming an interest rate of 17 percent and no other charges are added to it.
Remember, this is his issue, not yours. Even if you were to get married, you would not be legally responsible for debt incurred before taking your vows.
If, after all this, you're still interested in staying together, chat about career expectations and the incomes involved, as well as perspectives on saving, spending and borrowing. It is essential to talk about underlying issues surrounding money and credit. If you don't believe that it's OK to borrow even for essentials and he does, you need to get that out into the open and figure out how you're going to come together peacefully.
Share your credit reports with each other long before taking a trip down the aisle, too. Trust me, painful transparency now is better than nasty surprises later.
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