Married life is full of excitement and adventure — but the more routine aspects, like paying student loan bills, may include challenges.
How do you approach combined student loan debt as a married couple in a way that works for your financial plans?
What is a Spouse Student Loan Refinance?
With the average student loan debt being over $30,000, not including financing for advanced degrees, there is a pretty good chance that your spouse is bringing student loan debt into the marriage.
Combined with the debt that you already carry, this amount can be crippling causing you and your spouse to postpone important life events, like starting a family or buying a new home.
Spouse Student Loan Refinance is a unique loan program only offered by PenFed Credit Union that allows married couples with student debt to refinance all their loans together into a single comprehensive package. Spouse student loan consolidation gives a married couple the opportunity to combine both their federal and private student loans together into one simple monthly payment.
Why a Spouse Student Loan Refinance is a smart solution
Compared to traditional refinance loans, a Spouse Student Loan Refinance uses the couple’s combined household income to determine eligibility. So, a family where one spouse makes significantly more than the other can take advantage of their combined household buying power.
This also significantly improves the debt-to-income ratio, a leading indicator for all lending institutions when determining credit worthiness and repayment ability. When consolidating student loans with a spouse, two incomes and debt portfolios are going to be used in determining that all important ratio.
And when it comes to credit scores, a Spouse Student Loan Refinance uses the higher of the two spouses’ scores in determining the terms of the loan. When one spouse has a much higher score than the other, PenFed uses the higher option for determining the terms. Using this higher score can save tons of money over the life of the loan with a reduced interest rate.
Benefits of refinancing student loans with your spouse
Now that you have created one combined household as a married couple, it’s important to evaluate your financial goals for the future. You will be deciding if and when you want to start a family, where you want to live, and how you want to save for retirement.
Having a plan to tackle your student loans is also an important part of developing a life plan. Consider these benefits when evaluating a Spouse Student Loan Refinance including:
- Lower Interest Rate — You may qualify for a much lower interest rate which will save you thousands over the life of the loan. By combining all your loans, each with different interest rates, you may be eligible for a substantially reduced rate. You and your spouse may also want to consider a variable rate loan that has a lower rate in the beginning that gradual increases over the life of the loan. The benefit of this type of loan is keeping your payment low as you’re starting out.
- Choose Flexible Repayment Terms — You will be able to customize your repayment terms to fit your financial goals. If you want to pay off the loan quickly, you can opt for a shorter term with higher payments. Or you can spread the loan over a longer time frame (up to 15 years) with smaller payments if that fits with your overall life plan.
- One Loan Servicer — You will have one combined payment with a single loan servicer. With this simplified format, your student loan debt will become much more streamlined and easily managed.
Your spouse as the cosigner
Sometimes, because there is a desire or need to maintain separate student loans, a joint Spouse Student Loan Refinance isn’t preferable. In that case, one spouse can function as the cosigner for the other spouse so that a loan with favorable terms can be obtained.
In this type of situation, the loan will appear on both credit reports and the cosigning spouse is responsible for the loan if the other spouse is unable to pay.
What’s the next step for a spouse refinance
It’s important to gather and organize your student loan information so that you know what you are comparing. List all of your student loans along with your current interest rate for each and the repayment terms. You will also need both spouses’ income information and current credit scores to see who takes the lead.
To help in your decision process, Purefy has developed a rate comparison tool that allows you to compile loan estimates from several premier lenders, including PenFed Credit Union. This will give you an idea about the interest rates and payment terms you qualify for in a fast, easy form without impacting your credit score.
As part of your consideration, remember that when you refinance federal student loans you lose the generous repayment options that are associated with federal student loans, like forbearance and income-specific repayment plans. You may also want to consider the financial impact should you and your spouse seek a divorce in the future.
A final word on Spouse Loan refinancing
If you and your spouse both have student loan debt, PenFed’s unique Spouse Student Loan Refinance could be the right solution for you. It allows you to consolidate all of your combined student loans using both spouses’ incomes while relying on the highest credit score between you.
This unique loan package offered only by PenFed creates opportunities for spouses to proactively plan their financial futures. If you have questions about refinancing your student loans, sign up for a free refinance consultation with one of Purefy’s award-winning experts.
Contact us at Purefy to learn more about the unique PenFed Spouse Student Loan Refinance option today.