If you’re married and both you and your spouse have student loans, refinancing them together can help reduce the financial strain of your combined debt payments.
But spouse student loan consolidation isn’t available with most student loan refinance lenders, so it’s important to know what your options are and why it’s worth considering.
How spouse student loan consolidation works
Consolidating student loans with a spouse involves combining all your loans together into one new loan — instead of maintaining separate loan accounts.
If you want to combine student loans with a spouse, PenFed Credit Union is the only lender that offers that option. A spouse student loan consolidation through PenFed allows you to add loans from both partners during the application process, making it easier to take advantage of the benefits of refinancing for both of you.
During the application process, PenFed will combine your income and debts to determine your eligibility, which can be helpful if one spouse works full-time while the other is a stay-at-home parent or only works part-time.
What’s more, your interest rate will be based on the higher of your two credit scores and the higher degree between the two of you — so the person with the higher level of education should apply as the primary borrower.
These features are what makes a spouse loan consolidation drastically different than a typical refinance with your spouse as a cosigner. With a typical cosigned loan, the borrower and cosigner’s income and debts may be considered separately.
By combining your household income and credit histories with a spouse loan consolidation, your chances of approval and getting a lower rate may increase dramatically than if you pursued a refinance on your own.
Why consolidating student loans with a spouse can be beneficial
Spouse student loan consolidation can have a lot of benefits, especially in certain cases. Here are some of the upsides to consider:
- Take advantage of a higher credit score or income: Refinancing student loans can potentially help you save money with a lower interest rate. But if one spouse has a relatively low credit score or income — or no income at all — it can be tough for them to qualify for student loan refinancing on their own. With a spouse loan consolidation, you can take advantage of the fact that one spouse has a higher credit score and solid income to improve your chances of getting the loan — and a significantly lower rate.
- Combine loan payments: Managing your student loan payments can be overwhelming — especially if you both have multiple loan servicers — resulting in several payments every month. If you combine student loans with your spouse, you’ll have just one monthly payment for the two of you to plan for and stay on top of.
At the same time, it’s also important to consider the potential drawbacks of consolidating your student loans with your spouse. Repayment terms with PenFed Credit Union range from five to 15 years, which can be a long time to carry combined debt.
If your marriage ends before your repayment term does, you’ll need to go through the process of separating that debt. And depending on where you live, you may have to split it equally, even if one of you had less debt to begin with than the other.
As a result, it’s crucial that you communicate well about your decision to combine your student loan debt with your spouse, and discuss both the benefits and the drawbacks before you proceed.
The benefits of refinancing your student loans
Spouse student loan consolidation not only offers some unique benefits to married couples, but also provides all the same benefits of a traditional refinance loan. That includes:
- Potential for lower interest and payments: Depending on your credit and financial situation, you may be able to qualify for a lower interest rate than what you’re currently paying. In turn, a lower rate can result in lower monthly payments, which saves you money each month and over the life of your new loan. A lower monthly payment can also decrease your debt-to-income ratio, making it easier to get approved for a mortgage.
- Flexible repayment options: You can choose to pay back your new loan with PenFed over five to 15 years, giving you some flexibility based on your budget. If you can afford to pay off your debt faster than what you’re currently doing, you can pick a shorter repayment term and save big on interest. But if your budget is tight and you need some relief, you can also choose a longer repayment term — just keep in mind that you’ll end up paying more in interest if you don’t accelerate your payoff later on.
- Pick your own lender: If you have federal student loans, you didn’t get to choose which company services your loans. With student loan refinancing, however, you get to refinance with your lender of choice. This gives you the flexibility to compare features that different lenders provide, such as a spouse loan consolidation.
As you consider whether student loan refinancing is right for you, take some time to shop around and look at different lenders with Purefy’s Compare Rates tool. You can also schedule a free student loan refinance consultation to get some personalized advice based on your situation.
The bottom line
Consolidating student loans with a spouse can make a big difference, especially if there’s a wide gap between your credit scores or income levels. By combining your debts together, you may be able to save money on interest, simplify your debt repayment strategy and lower your monthly payments.
Keep in mind, though, that there are some potential drawbacks. In addition to some potential concerns down the road if you get divorced, refinancing federal loans will cause you to lose access to certain benefits including loan forgiveness programs, income-driven repayment plans and generous deferment, and forbearance programs.
Take your time to think through the decision, and consider consulting with a professional before you take the leap and refinance your student loans with your spouse.