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The Hidden Costs of a Relationship Burdened by Debt

Money conversations are often emotionally-charged ones and you may never get to the bottom of detrimental spending habits without addressing the underlying causes.

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Imagine the last argument over money that you had with your partner. Maybe it was about the credit card debt you recently incurred on unnecessary purchases, or perhaps your spouse’s personal loans prevented you from buying your first home.

No matter the topic, chances are there’s something deeper driving the arguments you two are having. 

According to Debra Kaplan, a financial therapist from Tucson, Ariz., seemingly miniscule things like the difference in a couple’s spending and saving habits could cause a conflict that ultimately requires the help of a therapist to untangle.

Kaplan found that seemingly unrelated issues for couples, such as problems in the bedroom, for instance, often manifest from hidden conflicts around money or work. A 2018 study published by Fidelity showed that more than half the couples that participated carried debt when they started the relationship, and 40% of those couples said that it negatively impacted their relationship as well. 

“The more you fight about a certain issue, the more entrenched you get in your position and the more exaggerated it gets,” revealed Brad Klontz, a founder of the Financial Psychology Institute. “Now you have to repair all those years of resentment and hurt that have built up, as well as resolve the issue itself.”

Luckily, there are solutions. Let’s take a look at some common debt-related scenarios that hold couples back in their financial journey, and how you can overcome them.

‘I want to be a stay-at-home spouse, but I feel guilty about it because of my student loan debt.’

A 2018 Brookings Institution study on student debt found that the number of borrowers that graduated with balances over $50,000 had tripled from 2000 to 2014. Crippling student debt like this can negatively affect the future financial opportunities of any young couple. 

So even though it may be in a partnership’s best interests for one to stay home and raise the family while the other works, a stay-at-home spouse with a large debt can sometimes harbor feelings of guilt or inadequacy. 

“One partner may feel that they take more than they are able to contribute to the financial resources of the family or the relationship,” said Kaplan. “They might think, ‘What I value and bring to the relationship may not be what you value and recognize as a contribution to this relationship.’”

But by talking about what each person considers important to the relationship — what Kaplan refers to as relational currency — they can get to a point where both can feel like equals even if they contribute in different ways. 

If both partners find value in one spouse maintaining their home and raising their children, for example, then that becomes equally as important as the work the income-generating partner is doing. 

‘Credit card debt from my previous relationship is hurting our ability to get a mortgage now.’

If the financial foundation of a previous relationship wasn’t strong, one partner may enter a new one saddled with a lot of consumer debt. That debt can quickly become a problem when the new couple begins planning for a future. 

Klontz advocates getting clear about your finances early on in your relationship so there aren’t any surprises later. “The conversation most people don’t have is, ‘Hey, what are your financial goals? How do you handle money? What percentage do you think we should be saving for retirement?’ — that sort of thing.”

The steps you take to pay off your debt, however, will be unique to each couple. Both of you may decide to pay off your debt together, for example, if your partner sees it as an investment in your joint future. On the other hand, the two of you may decide that you’ll pay off the debt yourself while your partner covers more of the bills in the meantime. 

Regardless of your decision, if you and your spouse plan on applying for any loan in the near future, you’ll want to set goals for each other and be held accountable to them. You should also work on repairing your credit months before the process starts, says Rick Kahler, a financial planner and the president of Kahler Financial Group. 

“See a loan officer long before you start shopping and find out upfront what issues are there. There can be all sorts of problems that could absolutely torpedo your home purchase.”

Kaplan and Kahler also recommend turning to a financial professional to get both of you through the situation at hand. They can help you take stock of your finances and find ways to improve your credit so that you can qualify for the loan you need. 

‘I’ve racked up thousands of dollars in credit card debt — but I don’t want my spouse to find out about it.’

The National Endowment for Financial Education conducted a survey that found that 41% of Americans who combine their finances with their partner have lied about money. 

Financial professionals refer to this as financial infidelity — lying to your partner about debt or money in general. It may be about how much money you’re making or how much student loan debt you have, but they’re often pieces of information that impact the financial plan that you and your spouse share. 

And just like traditional infidelity, this version can also cause feelings of mistrust and distress when your partner discovers the deed. 

Klontz says your best course of action in this case is to come clean with your spouse, even if you’re scared or worried about what they might think. “And that’s a tough one, because the partner might feel betrayed,” he said. “I’ve seen people get divorced over it.”

On the other hand, if you’ve just discovered that your partner has been lying to you about their finances, try to respond from a place of compassion and understanding. The need to hide financial decisions often stems from feelings of being judged or criticized by a partner for things like their purchases or investments. 

“There’s almost always ways to make things work financially,” noted Kahler. “It’s our emotions, our stories, our history, our past that all get in the way.”

Can debt consolidation help?

Pros of consolidating debt as a couple

Debt consolidation reduces some of the burdens that student and personal loans often leave on their borrowers. 

For one, it simplifies your monthly repayment schedule. Instead of juggling multiple loans — and potentially missing a payment in the process — you and your spouse only need to mark your calendars for one monthly payment. 

Many banks and online lenders also offer private student loan refinancing, which can help you and your partner qualify for better interest rates or a lower monthly payment, especially if one has a much higher income or credit score than the other. This allows you to put more of your money toward your principal and pay off your debt faster. 

Reconsolidating student loan debt can also relieve some of the responsibilities that come with federal loans, like figuring out which tax filing status is more beneficial or going through the annual recertification process for income-based repayment plans. 

Cons of consolidating debt as a couple

However, one of the biggest disadvantages of refinancing your federal student loans with a private lender lie in the benefits you give up. When you refinance your debt, you’ll lose federal protections like student loan forgiveness programs and payment plans based on your income, which can be especially helpful for couples with a stay-at-home partner.  Together, you should calculate the impact of these decisions. 

The decision to consolidate any kind of debt with a partner may also cause feelings of resentment later if the relationship goes south. To add insult to injury, you’ll be legally responsible for the loan until it’s paid off. Banks will not relieve you from ownership of the loan, even if most of the balance isn’t yours, because the terms were based on your joint application. If both you and your partner choose not to make payments on the debt, you’ll only hurt your credit in the process. 

Finally, debt consolidation doesn’t resolve the emotional issues that might have caused the debt in the first place. 

“It could be an appropriate strategy, but is it a game of whack-a-mole?” Klontz said. “If you don’t fix the psychology behind why you got in debt in the first place, now you’re just consolidating your debts … and then what?”

Without an in-depth understanding of your and your partner’s beliefs about money, you won’t get to the root of the problem — and you may rack up even more debt in the process. 

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