If you’re engaged to be married or are already a newlywed, the spirit of togetherness is probably on your mind. And it’s no surprise if that extends to your finances. The two of you may be paying for a wedding, opening a common credit card, charting out a combined budget, or establishing a joint checking account.
In the midst of this, you may be asking yourself, “Can I consolidate student loans with my spouse?” The short answer is no, you can’t. But because it’s becoming more and more common for both partners to bring student debt along into a marriage, it’s a perfectly fair question. Americans owe nearly $1.5 trillion combined on their student loans, a total exceeded only by home loans.
About 70% of college graduates leave school with loans—an average of $37,172 per borrower. Once you get married, it makes sense to ask whether you should continue handling payments individually or find a way to merge your loans and tackle them together.
While you cannot combine your student loans with your spouse’s, you can potentially refinance your loans and add your spouse as a co-signer.
Since this is a move you’re likely to live with for many years to come, it’s worth familiarizing yourself with all sides of the issue before making a decision. Here’s what you need to know:
Consolidating Federal Loans
Between 1993 and 2006 , married couples could combine their federal student loans through a joint consolidation loan. However, Congress canceled this program on July 1, 2006 . One of the reasons legislators chose to eliminate this program is that each spouse had “joint and separate liability,” meaning that each borrower was individually responsible for the entire loan amount.
This caused issues for many people, since that responsibility continued even after a divorce and sometimes limited a borrower’s eligibility for income-driven repayment programs, like Public Service Loan Forgiveness, and other benefits that come with federal student loans. The bottom line is, you and your spouse can’t consolidate your federal loans through the government, because the program is no longer available.
Refinancing Student Loans with Your Spouse as a Co-signer
There is another way you may be able to have both your and your spouse’s name attached to your student loans: student loan refinancing. To be clear, you would not actually combine both of your loans through refinancing—that’s not possible.
However, you could refinance your student loans and add your spouse as a co-signer to put your combined earning power on the dotted line, hopefully getting you a lower interest rate. This process involves taking out a new loan with a private lender and using it to pay off all your previous loans, whether they were federal or private.
You would then both be responsible for paying off the entire amount of the new loan which comes with new terms. Refinanced loans typically come with either fixed or variable interest rates that may be lower than your current rates. Lenders like SoFi allow you to refinance your student loans without any origination fees or penalties for paying them off early.
However, refinancing with a private lender means forfeiting access to federal loan benefits such as income-driven repayment or Public Service Loan Forgiveness. If you think you might take advantage of federal programs like this, refinancing might not be the right choice for you right now. And, of course, if you add your spouse as a co-signer, they are equally responsible for your monthly loan payments. Should you miss a student loan payment, it could affect them as much as it affects you.
Advantages of Refinancing Student Loans after Marriage
Student loan refinancing, whether you do it on your own or with your spouse as a co-signer, could get you a lower interest rate, a reduced monthly payment, or more advantageous terms than your current loans have.
If one spouse has a better credit score, or a more solid income or employment history, by cosigning they could help the other spouse qualify for a lower interest rate than he or she would qualify for alone. That can be a way to nab substantial savings over the life of the loan.
Disadvantages of Refinancing Student Loans with Your Spouse
Unfortunately, if you and your spouse uncouple, having them as your co-signer could make things tricky. When you refinance and add your spouse as a co-signer, you are both equally responsible for the loan balance. As you can imagine, communicating with an ex-spouse on how to tackle a major chunk of debt can get challenging. The co-signer may also still have to pay off the entire loan if the other spouse dies or becomes permanently disabled, though some lenders do offer discharges in these situations.
Another big consideration about refinancing, in general, is that if you have federal loans, you will be giving up a number of potential benefits by refinancing with a private lender.
For instance, you will no longer be able to apply for deferment or forbearance if you go back to school, become unemployed, or encounter financial hardship. Some private lenders do offer flexibility for short-term economic difficulties, but it’s not guaranteed.
You also will no longer be eligible for income-driven repayment plans that tie your monthly payment to how much you earn.
Similarly, you won’t be able to apply for Public Service Loan Forgiveness or the Teacher Loan Forgiveness Program even if you work in a qualifying field.
If you don’t earn much money, if you work in a public interest field, or if you anticipate financial hardships in the future, you may want to think twice about giving up these federal loan benefits.
Other Tips for Tackling Debt as a Couple
Whether or not you decide to refinance your loans, you may still want to address your student loans as a team. Here are some smart steps to take as a married couple dealing with student loan debt:
• Being honest—with yourself and your spouse. Having a high student loan balance might feel overwhelming, but avoiding your debt or hiding it from your spouse can affect your relationship. You can start by getting acquainted with exactly how much you each owe, your interest rates, and the loan terms.
Communicating with your spouse about any other sources of debt, as well as your assets and financial goals is equally important. Honesty and open communication are a good foundation for deciding how to confront your debt together.
• Knowing your repayment options. If you have federal loans, it can be helpful to read up on the different plans available for student loan repayment and the pros and cons of each. If you’re having trouble making payments, you can look into income-driven repayment plans or other federal loan forgiveness programs. And you can check out refinancing options. Many private lenders allow you to get pre-approved online in a matter of minutes, so you can get a sense of what terms you might qualify for if you refinance. Having this knowledge is critical for deciding what course of action is best for you as a couple.
• Making a budget. As you start to build a life together, getting on the same page financially can be helpful. Now that you’re a unit, it’s worth sitting down and listing out your combined income (after taxes) and expenses. If you’re not sure what you’re spending, a spreadsheet or budgeting app can help you track your outlays for a month. Once you have your current totals, you can think about how much you can afford to put toward student loans each month. That can help guide your decision on how aggressively to pay them off and whether to look for alternative repayment options. If you’re spending more than you make, it might help to discuss where you can trim, or how to increase your income.
• Considering the big picture. In addition to paying off debt, you probably have other financial goals, such as starting a family, traveling, saving for retirement, or buying a home. You may also have other existing debt, whether a mortgage, car loan, or credit card balance. It’s important to talk about these obligations and goals when figuring out what you can afford to put toward your student loans.
Figuring Out the Financial Path that’s Right for You
While you and your spouse can’t jointly refinance your student loans, you can still take advantage of the benefits of refinancing individually. By communicating openly about your finances, you and your partner can figure out which option is right for you, whether that means they’d cosign your loans, or you’d refinance on your own.
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Student Loan Refinancing
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If you are a federal student loan borrower you should take time now to prepare for your payments to restart, including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. (You may pay more interest over the life of the loan if you refinance with an extended term.) Please note that once you refinance federal student loans, you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans, such as the SAVE Plan, or extended repayment plans.
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