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Spouse Student Loan Consolidation Guide

Kat Tretina
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Despite a changing workforce, it’s still common for one person in a marriage not to work. According to the U.S. Bureau of Labor Statistics, only one person was employed in nearly 27% of married couples. And that’s where a spouse student loan consolidation could provide serious support for managing student loans – because no income doesn’t mean the non-working spouse doesn’t have student loan debt.

With more people going to college than ever before, an increased number of people are borrowing money to pay for school. In fact, Brookings reports that over 42 million Americans have student loan debt — that’s one in every eight people.

If you don’t have verifiable income of your own, what can you do to manage your education debt? You may be wondering: Can married couples consolidate student loans?

Yes! One company, PenFed Credit Union, has an option that is a spouse consolidation student loan, which can help you refinance your loans together and take advantage of your total household income. Here’s how it works.

Consolidating student loans with spouse: What does it mean?

Many married couples who both have student loan debt would like a solution to the question of shared financial responsibility for things like student loan debt. With so many people attending college these days, the likelihood that both people entering a marriage will bring student loan debt to the union is very high.

Can you consolidate student loans with your spouse?

Thanks to a spouse student loan debt consolidation from PenFed Credit Union it is possible. With spouse student loan refinancing, a unique program offered only by PenFed, the lender looks at your combined income and debt — rather than just your income alone — to determine whether or not to approve you for a loan.

For partners who don’t work outside the home, such as stay-at-home parents, that can be a huge benefit — and increase your chances of qualifying for a loan.

The lender will also look at whoever has the highest credit score. So applying for a spouse student refinancing loan can even help you secure a much lower interest rate if one person in the marriage has a significantly better credit score.

After you refinance your debt, the loan will show up on both of your credit reports, and you’ll share responsibility for repaying the loan.

How does this differ from a traditional student loan consolidation vs. refinancing? With a regular refinance loan, your spouse can act as a co-signer on the loan. However, many lenders still have minimum income and credit score requirements for the primary borrower, and they don’t combine your information together.

So can spouses consolidate student loans together? It’s possible through PenFed Credit Union and many benefits go along with this type of loan.

Is combining your student loans with your spouse’s debt a good idea?

Years ago, from 1993 to 2006, the Department of Education issued joint consolidation loans to married couples. Unfortunately, the government ended that program in 2006 due to concerns about how loans would be handled if a couple divorced. Individuals are still able to consolidate student loans with a federal Direct Consolidation Loan, but there is no option to include your spouse’s loans or qualify for a lower rate through consolidation.

However, today you can combine student loans with your spouse by working with a private lender. Purefy has partnered with PenFed to offer spousal consolidation student loans, allowing you to refinance and consolidate your loans into a single loan package with one due date and a single monthly payment.

To sweeten the pot even more, depending on your credit and employment history, you can potentially lower your interest rate saving money over the life of the loan.

In fact, married couples tend to have higher credit scores on average (which helps in securing the best possible interest rates) as well as almost twice the debt. Note the 2Q/2019 averages per Experian:

Marital Status                          Average Credit Score

Married                                                  715

Single                                                     656

U.S. Average                                         703

Spousal consolidation isn’t for everyone. If you aren’t sure if it’s right for you and your partner, here is what you need to know to make an informed decision.

Who should combine student loans with a spouse?

Spousal consolidation of student loans can work really well under the right circumstances.

Using your combined financial information, PenFed considers income and debt for both spouses instead of just one of you. That can mean scoring a much better interest rate that will cost you less money over the long term.

Let’s look at five alternatives where a combined or refinanced student loan with both spouses’ student debt makes financial sense. Afterward, you will be able to determine if this type of loan is best suited for your particular situation.

1. If one spouse is a stay-at-home parent or has low income

Individually, a person with low or no income, or with inconsistent means, will have a difficult time being approved by a private lender if they want to refinance their student loans.

When a married couple refinances their student loans, PenFed looks at the combined income of both spouses. So if one person is a stay-at-home parent or has a lower income, and the other person has a good, steady income, they can usually be approved.

2.  Someone is going to have a higher credit score

There can be a big discrepancy in credit scores between couples. For any number of reasons, one spouse may have a lower score where they wouldn’t be able to refinance their student debt on their own.

As long as one spouse has good credit (typically over 670, the higher the better), the new loan and interest rates will be based on the higher credit score.

3.  If one spouse has a much higher debt load

This can impact your debt-to-income ratio, or DTI, which is a major qualifying indicator for private lenders. With more combined income and less debt as a percentage, your DTI becomes more favorable.

That allows you and your spouse to be assessed jointly in more favorable terms. What was negative for one person can be manageable when viewed as part of the family whole.

To calculate your combined DTI, add up both spouses’ monthly debt payments, including mortgage or rent payment, loans for cars, monthly payments for credit cards, alimony and child support, etc., and divide by your gross monthly income.

Lenders want to see this ratio number as 40% or less of your total gross income. If it is higher than 40%, it’s important to make improvements to the DTI prior to applying for a refinanced student loan.

4.  If one spouse has a higher-level degree

When considering a married couple for loan consolidation, PenFed looks at who has a higher-level degree. The higher the degree, the better the loan rate offered. Typically the person with the higher-level degree is also the person with the larger income.

Advanced education is seen as a solid indicator of good income and the propensity to repay debts. While a bachelor’s degree is good — a master’s degree, Ph.D., or medical degree is viewed as highly desirable for private lenders.

5.  Collectively, you have a lot of loans

This is often the reason people begin to look at the options that are available for refinancing or consolidation. Like we talked about before, married couples can enter into their new lives with tons of student loans. It can be overwhelming trying to manage all of the due dates and monthly payments to different lenders.

When you combine student loans with a spouse, you reduce the financial complexity down to one monthly payment to one lender. Additionally, many lenders offer discounts when you set up auto payments — sometimes as much as 0.25% off of the interest rate.

Spouse Student Loan Consolidation vs. Cosigning Spouse’s Student Loans

You may be wondering what the difference is between consolidating student loans with a spouse and cosigning a spouse’s student loan refinance.

While you would be legally responsible for the loans in both scenarios, spouse loan consolidation would make it difficult to separate the loans in the event of divorce, whereas cosigning could potentially allow cosigner release (if you choose a lender who offers this benefit). If both parties have student loans and you want the simplicity of having one monthly payment, you would only be able to combine the loans through a spouse student loan consolidation.

Read on for more pros and cons to each scenario.

Benefits of combining student loans with your spouse

While there are some drawbacks to spousal student loan refinancing, consolidating your loans together with your spouse’s debt has four major benefits:

1. You’ll increase your chances of qualifying for a refinance loan

If you don’t have a job outside of the home, it can be challenging to find a lender willing to approve you for a loan. Even if your spouse acts as a co-signer, many lenders don’t want to work with you.

But with spouse student loan refinancing, PenFed looks at your combined household income and whoever has the highest credit score. With more income and better credit, you’re more likely to get approved for a loan with a great interest rate.

2. You can simplify your student loan payments

To pay for college, you and your spouse likely had to take out multiple student loans. You may have a mix of both federal and private student loans, which means you have multiple loan servicers, minimum payments, and due dates to remember.

Having so many different loans to keep track of can be difficult to remember, and it can make it easy to forget payments and fall behind.

When you refinance your loans together, your loans are consolidated. You’ll have one loan to manage, with a single loan servicer and one simple monthly payment.

Your debt is ultimately much easier to manage, and you’re less likely to forget your payment due dates.

3. You’ll save money over the length of your repayment

Married couples may often question: Can spouses consolidate student loans together to save money?

Because lenders look at your household income, credit score, and what kind of degrees you and your spouse have, you could qualify for a lower interest rate than you’d get if you applied on your own.

If you qualify for a lower rate, more of your monthly payment will go toward the principal rather than interest after you refinance. Over time, refinancing your loans together can allow you to save a significant amount of money.

For example, let’s say you had $30,000 in student loans at 6.5% interest and a 10-year repayment term with a monthly payment of $340.64 and a total interest of $10,877.27. Your spouse had $20,000 in student loans at 7.2% interest with a 10-year repayment term and a monthly payment of $234.28 and total interest of $8,114.05.

If you didn’t refinance your debt, and instead made the minimum payments on both loans for both repayment terms, you’d repay a total of $68,991 over 10 years. Interest charges would cost you almost $19,000.

But if you applied for a spouse student refinancing loan and qualified with a 3.5% interest rate and a 10-year repayment term, you’d repay just $59,332 over the length of your loan with just $9,331.52 in interest.

Consolidating your loans together would help you save $9,660 in total — money that could be better spent on a down payment for a house or put into your joint retirement account.

4. You can customize your repayment plan to meet your personal needs

When you refinance your student loans, you have the ability to select repayment terms that are more in line with your current financial goals.

If you are interested in paying off your debt more quickly, you can select terms as low as five years. And if you want to spread your loan out and lower your monthly payments, PenFed offers spouse student loan refinancing loans with repayment terms up to 15 years.

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When should you combine student loans with a spouse?

The best time to pursue consolidating student loans with your spouse is when interest rates are low and you are both in a good position financially in terms of income and credit history.

Additionally, to qualify for a loan, you must meet these qualifications as well:

  • You must both be of legal age in your state
  • You must both be US citizens
  • At least one of you must have graduated with a bachelor’s degree (or higher)
  • Your combined income should be at least $42,000 per year
  • Your combined student debt should be no less than $7,500 and no more than $300,000

Are interest rates at a good level?

Yes, in fact, they are at historic lows with no end in sight for that to change. With the economic uncertainty of the last couple of years, the Federal Reserve (the Fed) has opted to keep interest rates at record lows through 2023 and possibly beyond.

While inflation has been heating up, the Fed has resisted increasing rates which would have the effect of “cooling off” the economy and making borrowing money more expensive.

With PenFed, they offer only fixed-rate loans (no variable rate loans) that currently range from the mid 2% range to 5.6%+, and terms that can be customized up to 15 years.

Other factors to consider when you combine student loans with a spouse

Student loan consolidation for married couples can make a lot of sense — but there are other important aspects of combining finances to think about.

Outside of the benefits of getting a lower rate and customizing your repayment term, it’s essential to weigh the negatives of consolidating your debt with the positives.

Entangling — and disentangling — your debt with your spouse can be complicated and lead to complex decisions. When thinking about, “can you combine student loans with a spouse?”, here are some common drawbacks of married student loan consolidation.

Refinancing spouse student loans means giving up federal loan benefits

If you or your spouse have federal student loans from the U.S. Department of Education, you’ll lose all federal benefits after consolidating your loans together through refinancing.

That’s because a spouse student loan debt consolidation is a refinancing loan from a private lender — and this type of loan is only available through PenFed Credit Union.

As a private lender, PenFed doesn’t offer the same features as the government. By refinancing your federal loans through a private lender, you’re essentially converting them into a single new private loan.

Some of the key federal benefits that aren’t offered with private loans include:

  • Access to the Public Service Loan Forgiveness (PSLF) program.
  • The ability to enter an income-driven repayment plan such as income-based repayment, income-contingent repayment, Pay As You Earn, and Revised Pay As You Earn.
  • Access to the generous federal forbearance and deferment programs.

If taking advantage of one or more of these federal benefits is important to your financial well-being, applying for a student loan consolidation for spouses may not be in your best interest.

For example, if you work for an eligible employer under PSLF — like a federal, state, local, or tribal government agency or a not-for-profit organization — you’d have all your student debt forgiven after 10 years of qualifying payments.

If you’re in that situation, it’s likely more beneficial for you, in the long run, to remain in that program than to consolidate your federal debt with a private lender.

There’s the possibility you end up separating

Although you and your spouse may be happily married, there is a chance you could separate at some point in the future. It’s not a reality many couples want to think about, but sadly, divorces are quite common.

If you and your spouse do decide to split after getting a spouse student loan consolidation, it can be difficult to handle as you’ll both be equally liable to pay the remaining debt. Figuring out a plan forward that works for both parties could become stressful and complex, so it’s important to at least consider the possibility of a divorce and how it could impact your combined finances.

Be prepared to take on the debt alone

Another potential situation that many couples don’t want to entertain in their plans is the possibility of a spouse passing away.

But even though it’s extremely sad to think about, it’s important to understand the financial impact of losing your loved one. After getting a student loan consolidation for spouses, you’ll both be equally responsible for the combined balance of the debt. If your partner passes away, you may become entirely responsible for the whole amount due.

That’s the case even if your partner was the one who had the majority of student loan debt.

However, if your student loans remain separate and your spouse passes away, many lenders (such as the U.S. Department of Education) are likely to discharge their remaining debt completely — removing that additional burden from your shoulders.

Who is eligible for a spouse student loan consolidation?

There is one premier lender that offers spouse student loan consolidation loans: PenFed Credit Union.

To combine student loans with a spouse, you need to meet the following criteria:

  • Credit score: You both need to have a minimum credit score of 670, and at least one of you needs to have a credit score of 700 or higher. If the loan amount requested is $150,000 or more, you or your spouse will need a credit score of 725 or higher.
  • Degree type: If you both have the same degree type, it doesn’t matter who is the main applicant. But if one of you has an advanced degree, such as a master’s or doctoral degree, that person should be the main applicant to increase your chances of qualifying for a lower interest rate. Only one person needs to have achieved a bachelor’s degree or higher to refinance; there are no degree requirements for the other partner.
  • Loans: The minimum amount you can refinance is $7,500; the maximum is $300,000.

While combining your education debt together with your spouse’s can be a good idea for some, it’s not for everyone.

Whether you decide to move forward with your loan application or refinance your loans on your own, it’s a good idea to shop around with different lenders. You can use Purefy’s Comparison Rate Tool to get quotes from multiple lenders, including PenFed Credit Union.

How do you consolidate student loans with a spouse?

Here’s a brief recap on how to consolidate student loans with your spouse.

A spouse student loan debt consolidation is a refinance loan that combines both your and your spouse’s student debt together under one single private loan. And this type of loan is currently only available through PenFed Credit Union.

By pursuing a spouse student loan consolidation from PenFed, you can take advantage of your household income and the higher credit score between you and your partner. With your combined income and a better credit score under consideration, you’re more likely to qualify for a refinance — and be offered the lowest possible interest rates.

If you or your spouse happens to have a much higher income or better credit, PenFed’s spouse student loan consolidation may be your best option to save the most money on your student loan debt.

Although this type of loan can often be the right solution for many married couples, you and your partner also have the option to pursue a cosigned spouse student loan. If you have a strong credit history, cosigning your spouse’s student loan refinance will still give your loved one a better chance at being approved for consolidation and lower rates.

However, a cosigned refinance won’t use your household income or only the higher credit score — the primary borrower’s income and credit history will still be taken into account. Adding a creditworthy cosigner to the loan simply makes it less risky for the lender — and therefore more likely to be approved — since the cosigner will be responsible for making payments if the primary borrower is unable.

In comparison to PenFed’s exclusive spouse student loan consolidation, a cosigned student loan refinance is an option offered by nearly every private lender. So you may be able to shop around a wider variety of student loan refinance companies — each offering different terms and unique features — to find the right fit for your specific needs.

How to compare spousal student loan consolidation rates

Normally, to refinance a student loan, whether a spouse loan or an individual co-signed loan, you would need to research lender information. That means visiting numerous lenders to find the best rates, learn about their special offers and “exclusive” programs, understand their fees for applications and originations, and submit pre-approval applications with each finance company.

Once you have collected all the information, you would then need to organize and compare your results to find the best option that you qualify for with the best rates.

We think there is a better way.

Steps to consolidating student loans with spouse (or co-signing for spouse)

At PenFed for a spouse consolidation student refinance loan

To apply for a spouse consolidation student loan at PenFed, the process works a little differently. You would use PenFed’s Find My Rate Tool to get a pre-approved rate quote after providing them with some personal and financial details about you and your spouse, including:

  • Identifying information such as your name, address, and social security information
  • Your spouse’s information
  • What degree you and/or your spouse obtained (at least one of you has to have graduated to be eligible for a PenFed refinance loan)
  • What schools you both attended
  • Current student loan balances

You then receive a qualifying offer with the best interest rate and loan terms. Once you select the right package for you and your spouse, you can apply for a loan directly with PenFed. For the application, you will need to select the primary borrower and enter information for both you and your spouse.

For a co-signed student loan refinance

At Purefy, we have developed a far simpler way for you to compare multiple lenders for an individual co-signed loan.

Our rate comparison tool allows you to enter your financial and personal information into a simple form and our award-winning comparison engine finds the best options and presents them to you in a sortable form that can be used for easy side-by-side evaluation.

With either option (spouse consolidation student loans or co-signed refinance loan), our team of industry-leading lenders doesn’t charge fees for their loans, and each offers a penalty-free pre-payment option.

When married couples should combine student loans

PenFed has developed this unique product to combine student loans between spouses through their spouse student loan refinance loan. This can be an outstanding option for you and your spouse if you:

  • Have one spouse with better credit that can qualify for increased buying power and better interest rates
  • Have one spouse that stays at home or has a significantly lower income
  • Have one spouse that has higher outstanding debt which negatively affects their debt-to-income ratio or DTI
  • Have one spouse with a higher-level degree (graduate or post-graduate)
  • You don’t need access to federal direct loan benefits like repayment or deferment programs
  • You both feel confident that the marriage is solid and there is no risk of separating

Let’s talk pros and cons about spousal consolidation student loans

There are several benefits and drawbacks to combining your student loans with your partner’s. Here are six pros and cons to consider.

Pros of spousal student loan consolidation

1. You’ll have just one combined monthly payment

As we talked about earlier, according to Saving for College, the typical number of student loans people have at graduation is eight to 10 different loans. That means a married couple could have as many as 20 loans and 20 different monthly due dates to remember.

If that sounds overwhelming, spousal consolidation can be a smart move. You’ll combine your loans and have just one loan and one payment to keep track of each month. This can go a long way in simplifying your monthly family financial management.

2. There will be only one loan servicer to deal with

If you have several different student loans, they may be managed by different loan servicers, too. Servicers can vary widely in terms of customer support and convenience, so it can be frustrating to deal with multiple loan servicers. When you refinance your loans together, you’ll have just one loan servicer to work with, going forward.

3. You’ll increase your chances of getting approved for loan consolidation

When you apply for a spousal consolidation loan, you can submit your combined income and expenses on your application. With a higher income, you have a better chance of getting approved for loan consolidation and qualifying for a lower interest rate. Spousal consolidation is especially helpful if one person stays home or earns significantly less than their partner.

Cons of spousal student loan consolidation

1. You’ll lose federal benefits

When you consolidate your loans together, your loans will become private loans and no longer be eligible for the federal benefits afforded to people with federal student loans.

That means that if you previously took advantage of the federal student loan benefits, you’ll lose out on perks like income-driven repayment plans, federal forbearance or deferment, and Public Service Loan Forgiveness.

If either of you works for a non-profit organization or government agency, losing your eligibility for loan forgiveness can be a significant drawback.

2. Splitting up may be more difficult

No one wants to think about it, but divorce is quite common. In fact, Psychology Today reported that one in four recent marriages would end in divorce. If the worst happens and you eventually split up, dealing with a spousal consolidation loan can be complicated as you both are equally liable for the debt.

It’s better to address those concerns before you further entangle your finances. There can be tax implications as well that deserve your full attention.

3. You could be on the hook for the full balance if your partner dies

When you apply for a spousal consolidation loan, you and your partner are equally responsible for the debt. If something horrible should happen and one of you passes away, the remaining spouse may still be responsible for the combined balance of the debt. That’s true even if the deceased partner had the bulk of the original loans.

If you kept the loans separate, your spouse’s lenders would likely discharge the debt completely if they passed away, eliminating that burden for you.

Consolidate spouse student loans through refinancing — the bottom line!

If you and your spouse have been thinking about student loan refinancing for loans that both of you hold, consider consolidating student loans with your spouse through the unique product offered by PenFed. By consolidating student loans with a spouse, you bring increased buying power through a larger income pool (if you both work) and a better possible credit score.

This may well position you to score a much better interest rate and preferred repayment terms which can have a significant impact on your financial goals for the future.

Try the PenFed Find My Rate Tool to use your combined information, including income, degrees achieved, schools attended, etc., to see what you and your spouse qualify for before submitting an actual application.

Or if you would prefer to co-sign on your spouse’s loan, try Purefy’s Rate Comparison Tool to find the best offers from a group of leading lenders who are all anxious to do business with you. Some lenders even offer the ability to get a cosigner’s release following 12 months of solid payment history — allowing your spouse to improve their score over time which would help you both long-term. Either way, your credit history is not impacted until you apply for the actual loan, and it only takes about 15 seconds to get an initial pre-approved offer if you qualify. So, check out the possibilities today.

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Education Loan Finance is a nationwide student loan debt consolidation and refinance program offered by Tennessee based SouthEast Bank. ELFI is designed to assist borrowers through consolidating and refinancing loans into one single loan that effectively lowers your cost of education debt and/or makes repayment very simple. Subject to credit approval. See Terms & Conditions. Interest rates current as of 11-21-2022. The interest rate and monthly payment for a variable rate loan may increase after closing, but will never exceed 9.95% APR. Interest rates may be different from the rates shown above and will be based on the term of your loan, your financial history, and other factors, including your cosigner’s (if any) financial history. For example, a 10-year loan with a fixed rate of 6% would have 120 payments of $11.00 per $1,000 borrowed. Rates are subject to change.

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Fixed Rate Loan Terms: 5 years/60 monthly payments, 7 years/84 monthly payments, 10 years/120 monthly payments, 15 years/180 monthly payments, or 20 years/240 monthly payments. Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. This rate is expressed as an APR. Fixed APRs range from 3.94% to 8.48% APR [low to high range with 0.25% auto-debit rate reduction]. Rates are subject to change without notice. Fixed rates will not change during the term. Since there are no fees associated with this loan offer, the APR is the same percentage as the actual interest rate of the loan including a 0.25% auto-debit rate reduction. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. All estimates are based on information provided by you and are for informational purposes only, accuracy is not guaranteed and may not reflect actual rates or savings and do not constitute an offer of credit. Your actual rate, payment and savings may be different based on credit history, actual interest rate, loan amount, and term, including your cosigner [if applicable]. If applying with a cosigner, we use the higher credit score between the borrower and the cosigner for approval purposes. All loans are subject to credit approval.

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