When you get married, “yours and mine” becomes “ours” — for almost everything except student loan debt. If one or both of you borrowed to fund your education, you may be interested in consolidating your debt together so that you can share repayment responsibilities and get out of debt faster.
However, if you borrowed using the Federal Direct Loan program, you cannot use federal consolidation to merge your debt with your spouse’s. Instead, you must use a private refinancing company like PenFed. Consolidating your private student loan debt with your spouse’s can also be tricky. Fortunately, PenFed can simplify the refinancing process for spouses who would like to combine their private student loan debt as well.
What are the advantages of consolidating student loans with spouse?
Consolidating student loans with spouse can yield several advantages. For example, if one of you has a significantly higher credit score than the other, then PenFed can use the higher credit score to determine the interest rate for the loan. This can mean significant savings for a spouse with a low credit score.
If there is an income disparity between spouses, then this can be an obstacle when it comes to your tax filing status. This can also potentially make it difficult to qualify for income-based repayment programs, especially if one or both of you are currently using a federal repayment plan like Pay As You Earn (PAYE) or Revised Pay As You Earn (REPAYE).
Consolidating student loans with spouse through a private refinancing company means you won’t have to worry about your tax filing status or annual recertification process for income-based repayment each year.
Merging your debts can also come with the benefits typically associated with refinancing, including lowering your interest rate, lowering your monthly payments, adjusting the length of your repayment term, and decreasing the number of monthly payments and student loan servicers that you have to deal with.
Additionally, co-mingling your debts can help you avoid assigning blame to the person whose debts are higher, because the debt is now truly “yours.” Having the same rate as your spouse also means you will achieve repayment at the same time. This can foster a sense of teamwork and motivate both of you to pay off your debt as soon as possible. Then you can move on to other milestones you may want to achieve as a couple, such as buying a house or starting a family.
When is it a bad idea to refinance my student loan debt with my spouse’s?
Despite the advantages outlined above, refinancing your student loan debt with your spouse’s is not always the best idea.
If one or both of you primarily borrowed using the Federal Direct Loan program, then you should think long and hard about refinancing your student loan debt through any private company. Even if you intend on consolidating student loans with spouse, it may not be the best decision.
This is because anytime you refinance Federal Direct Loans with a private company, you are agreeing to give up all the benefits associated with those loans. These benefits can include eligibility for deferment and forbearance, access to income-based repayment programs, and eligibility for forgiveness.
Additionally, if one or both of you work in public service and you would like to maintain eligibility for the Public Service Loan Forgiveness program (PSLF), then keeping your loans Federal — and therefore separate — may be the best choice.
Although PenFed can work with you down the road to separate your student loans again if necessary, doing so can be complicated for variety of reasons. It is better to feel sure that both of you are truly in it for the long haul.
If you’ve decided to move forward with consolidating student loans with spouse, then make sure you are both on the same page regarding all potential issues, including:
- How will the monthly payments be made?
- What are your goals with refinancing? Are you lowering your interest rate? Decreasing your monthly payment? Getting out of debt sooner?
- How will refinancing fit in with your other financial goals?
In the end, only you and your spouse can decide if refinancing your student loans with a private company is the decision that will work best for you. Don’t be afraid to be unconventional if that is what is best for you, your spouse, and your finances.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Rates (APR)||Eligible Degrees|
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Check out the testimonials and our in-depth reviews!
|2.56% - 7.40%||Undergrad & Graduate||Visit SoFi|
|2.57% - 6.32%||Undergrad & Graduate||Visit Earnest|
|2.58% - 8.12%||Undergrad & Graduate||Visit Lendkey|
|2.80% - 7.02%||Undergrad & Graduate||Visit Laurel Road|
|2.54% - 6.65%||Undergrad & Graduate||Visit CommonBond|
|2.90% - 7.34%||Undergrad & Graduate||Visit Citizens|