Marriage and loans, a unique scenario

[petomed]

I’m turning 30 this year and will finally have everything I need to apply in the spring. The time has also come to revisit the marriage question. The problem here is our salaries, which will be changing over the next few years, by a lot.

I’m an engineer and will be taking home > 90k right up until I matriculate. She is currently a nurse at < 60k but is in NP school. We have phased everything such that she will finish NP school the summer I start medical school. At that point, my income goes to zero and hers becomes > 100k. I have a dependent on the way as well. He/she will fall under my taxes if we remain unmarried.

So, getting married now puts our expected family contribution (EFC) at the time of applying for FAFSA the first year at > 150k. Subsequent married years would put my EFC at her salary of > 100k. Staying single leaves me at < 90k for the first year then squat for subsequent years.

The issue with this is need-based scholarship, which some top tier schools offer. Marriage means a large EFC and likely very low need-based scholarship, inherently more grad plus loans. The ivy’s are indeed unlikely, but I haven’t encountered a reason yet to cross them off (haven’t sat for the MCAT). A low MCAT means no ivy’s, no need-based scholarship to consider, and no questions surrounding marriage.

We’ve both crawled our way out from low income families, so their contribution components will be very small either way.

Marriage of course has intangible value, and I get that. I’d just like someone to shake the financial sense or missense into me here, if there is a clear ‘do it’ or ‘definitely don’t do it’ to be had. From what I can tell, the total loan differential based on need-based differences here could be quite large.

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[paimei42]

The inner anarchist in me says the value of the marriage is essentially 0 and especially from a financial point of view (maybe even negative in your case).

For a more concrete answer, I would calculate the tax savings of filing jointly and compare that to what you would expect /hope for in scholarship monies. If you really want to get technical, you can then discount it and get a present value of the two numbers and then you would need to back of the napkin figure out the probability of getting those scholarships, which I understand is a tall order given how far out you are in the process.

Essentially, you're gonna be choosing between guaranteed X amount in tax savings over the next 8 or so years vs the chance of getting a meaty scholarship/better FA.

 

[petomed]

The inner anarchist in me says the value of the marriage is essentially 0 and especially from a financial point of view (maybe even negative in your case).

For a more concrete answer, I would calculate the tax savings of filing jointly and compare that to what you would expect /hope for in scholarship monies. If you really want to get technical, you can then discount it and get a present value of the two numbers and then you would need to back of the napkin figure out the probability of getting those scholarships, which I understand is a tall order given how far out you are in the process.

Essentially, you're gonna be choosing between guaranteed X amount in tax savings over the next 8 or so years vs the chance of getting a meaty scholarship/better FA.

That’s a pretty solid objective measuring stick. I’ll weigh the concrete single vs. married tax incentives then consider them against the off-chance of a superb mcat.

The real push for marriage is health insurance costs during these two years before medical school. It would be tremendous piece of mind for her to be on my insurance. Right now she works full time, is a full time student, and has bad, all day, morning sickness. It would be such a relief for her to switch to per diem while she’s in school. That and she can spend much more time at home with baby, also squashing daycare costs. But then she loses her health insurance and we have to fork over for market-driven insurance. This is essentially a direct penalty for not being married.

 

[paimei42]

That’s a pretty solid objective measuring stick. I’ll weigh the concrete single vs. married tax incentives then consider them against the off-chance of a superb mcat.

The real push for marriage is health insurance costs during these two years before medical school. It would be tremendous piece of mind for her to be on my insurance. Right now she works full time, is a full time student, and has bad, all day, morning sickness. It would be such a relief for her to switch to per diem while she’s in school. That and she can spend much more time at home with baby, also squashing daycare costs. But then she loses her health insurance and we have to fork over for market-driven insurance. This is essentially a direct penalty for not being married.

Totally forgot about the SNAFU that is healthcare. Essentially add that into the tax incentive calculation then. How much will you guys be saving in health insurance if shes on your plan? If anything this is probably going to be a very strong push toward marriage now.

 

[petomed]

For the same coverage as my health plan, you’d have to max out whatever is offered on healthcare.gov. I venture to guess that will be no less than $800/mo for her individual plan. This actually sounds like a pretty straightforward comparison once I have all the numbers. I can back out directly the need-based scholarship that would have to be on the table as a breakeven point.

 

[paimei42]

Take into account that she might not NEED all of the coverage that you have on your current plan and there might not be a need to get the fanciest ACA plan, though I think doing the calculations with 2-3 tiers of coverage in the marketplace will give you a sort of "confidence interval" for figuring that out.

You should also consider how much less she will be making if she is working per diem, though it seems that that decision is some what already made for non financial reasons. If that is the case, you should definitely either not really consider it or weigh it much less.

 

[Naruhodo]

You'll need to run the numbers for yourself but here's some considerations.
1) Some medical schools will NEVER consider you independent of your parents, regardless or your age or marital status. I know you say you both come from low-income families so this shouldn't affect your financial aid, but at least your parents have to be OK with sharing their tax information with you so that you can complete everything for FAFSA and the school. Again, this may not be every school, and you might be close with your parents such that this is a non-issue, but it was something that took me by surprise and kept me from being eligible for much needs-based aid despite having a low household income between my spouse and myself.
2) Any tuition you do pay will be recorded on a form 1040 and you can qualify for a tuition and fees deduction on your taxes. As a married filing jointly person this has meant we get a good amount of our taxes back each year I'm in medical school.
3) In terms of health insurance, what a medical school will charge you for health insurance is often much more than what you (or your spouse) will have to pay through work to get health insurance. I believe I save about $4,000 per year by being on my spouse's health insurance instead of on the health insurance offered by my school.