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Whether you just got married or you’ve been with your spouse for years, you may be thinking about combining your finances.

Doing so can be challenging, especially if you both have different perspectives on managing money. But it can also help simplify your financial plan and potentially even help you save money.

With an average of $37,172 in student loan debt per borrower , it’s more important than ever to find ways to simplify and accelerate the debt repayment process. Refinancing student loans with a spouse could help you achieve both goals.

Consolidating Through the Department of Education

If you have federal student loans, you can consolidate your loans with a Direct Consolidation Loan .

If you do, the Department of Education will take the weighted average of the interest rates from all of your loans and round it up to the nearest one-eighth of a percent.

This means that consolidating your loans with the government may help simplify your loan repayment, replacing several monthly payments with just one.

Consolidating student loans with a spouse isn’t an option through the Direct Loan Consolidation program. You can only combine loans with your name on them, making it impossible to add your spouse.

Refinancing Your Student Loans

While the federal government won’t let you consolidate student loans with your spouse, a private student loan lender, like SoFi, will.

The process isn’t always straightforward, though. Typically, you would apply for a refinancing loan and add your spouse as a cosigner. Not only would this help you combine your finances, but it could also help you spend less money in interest on your new loan.

That’s because your interest rate is typically determined by your creditworthiness and income, and adding a cosigner with a strong credit history and solid income can help you secure a lower rate, even if your credit history is strong on its own.

To give you an idea of how much you can save on interest, let’s say your (not consolidated) federal student loan debt is $30,000 with a weighted average interest rate of 6%. (For the record, the 6% interest rate is a hypothetical based on a federal graduate and undergrad loans, which currently have fixed interest rates of 5.05% on the low end and 7.6% on the high end, depending on the loan.) On a 10-year Standard Repayment Plan , your monthly payment would be around $333, and you’d pay about $9,967 in interest over the life of your loans.

Now, let’s say you were to refinance your student loans with a private lender and qualified for a 5% fixed rate with your spouse as a cosigner. If you were to keep a 10-year repayment term, your monthly payment would be about $318, and you’d pay around $8,184 in interest.

That’s a savings of nearly $1,783 that you can use for other financial goals. To see how refinancing could impact your student loans, you can take a look at our easy-to-use student loan refinance calculator.

Considerations to Think About

Student loan debt and marriage may be a challenge, so it’s important to make sure refinancing student loans with your spouse is a good choice for your situation.

The primary consideration is that both you and your spouse as a cosigner would be legally responsible for paying off the debt. This means that if you experience financial hardship and miss payments or default, it could ruin both of your credit histories.

Some student loan refinance lenders offer a cosigner release program that allows you to remove a cosigner after a set number of consecutive, on-time payments.

Another thing to consider is that refinancing federal student loans will result in the loss of certain benefits the Department of Education provides. Specifically, private lenders typically don’t offer income-driven repayment plans. Also, you won’t be eligible for certain federal student loan programs, including Public Service Loan Forgiveness.

So as you consider the benefits of consolidating student loans with a spouse through refinancing, make sure you also include the drawbacks in your process.

Finding Out Your Potential Savings

Having student loans in a marriage can be challenging, but with open communication, you can stay on track.
If you’re even remotely considering refinancing your student loans with your spouse as a cosigner, check your rate offers to see if doing so can save you money. Whether or not you qualify for a lower interest rate, exploring the option may help make your decision easier.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SOSL18131

Sallie Mae, the private student loan company, used to offer loan consolidation for the loans they issued. But here’s the thing: that’s not happening anymore. Student loan consolidation refers to the process of combining multiple loans into one, in order to have just one monthly payment.

When you consolidate federal loans, through a Direct Consolidation Loan, the interest rate becomes the weighted average of all your interest rates combined, rounded up to the nearest eighth of a percent.

But even without Sallie Mae offering direct student loan consolidation, there are still options available to those with private Sallie Mae loans looking to consolidate or refinance their student loans.

Sallie Mae Ends Loan Consolidation

Sallie Mae began as a government-sponsored entity, but went private in 2004. Then in 2014, the company split into two separate organizations; Sallie Mae is a private student loan lender, and now Navient Corporation helps to service government loans.

If you previously had multiple Sallie Mae student loans, you were able to consolidate them into one Sallie Mae loan. But the company no longer offers loan consolidation—and loan refinancing through Sallie Mae isn’t an option either.

Recommended: Can You Get Your Sallie Mae Loans Forgiven?

Student Loan Consolidation vs. Refinancing

These terms are sometimes used interchangeably, but they do have some important distinctions. Sallie Mae consolidation is no longer offered for their private loans. However, students can refinance their Sallie Mae and other private student loans through another private lender or bank, which would then switch over the management of the new refinanced loan to that lender.

For federal loans, a Direct Consolidation Loan allows you to combine multiple federal student loans into one loan with a fixed interest rate. You might not receive a lower interest rate by choosing to consolidate your loans (because of the weighted interest rate rounded up), but you will only have to make one monthly payment. Private student loans cannot be consolidated via a Direct Consolidation Loan.

Refinancing your student loans is another repayment option to consider. While Sallie Mae does not offer refinancing, other private lenders do, including SoFi. These companies essentially purchase your existing student loans and offer you a new loan to pay them off, with a new interest rate and new terms. Private and federal loans are both able to be refinanced into a private loan.

You can refinance just a single loan, possibly lowering the interest rate, or combine multiple loans to refinance your overall student loan debt. If you refinance federal loans, they become private loans in the sense that you will no longer be eligible for federal repayment plan benefits such as Income-Driven Repayment or Public Service Loan Forgiveness.

Student loan consolidation and refinancing with a private lender can offer the chance to restructure your loans. While consolidation can simplify debt and possibly lower monthly payments, refinancing can help you pay less over the life of a loan with a lower interest rate or different repayment terms. You can calculate what you might save if you consolidate or refinance your Sallie Mae or federal student loans.

Consolidating Student Loans

You may be able to consolidate your federal student loans with a Direct Consolidation Loan. While private Sallie Mae loans will not be eligible, federal student loans serviced by their new company, Navient, may qualify for consolidation. Stafford Loans, Direct Loans, and Direct PLUS Loans are all federal student loans eligible for Direct Loan Consolidation, too.

Consolidation may help make repayment easier to manage, since there will only be one monthly payment to make, rather than multiple payments. You can also choose new loan terms, with the possibility of extending out the repayment term to 20 or even 25 years.

While this can help you manage your monthly bill and possibly lower your payments, you must also remember you may be in debt longer and pay more interest over the life of your new consolidated loan.

Direct Consolidation Loans from the government also take the weighted average of your previous interest rates, rounded up to the nearest eighth of a percent so it’s possible that you will end up with a higher overall interest rate than you had before.

Before you make a decision on what to do with your Sallie Mae loans, could be a good idea to check that your loans are private loans from Sallie Mae, and not federal loans managed by their sister company, Navient, to avoid any confusion.

Considerations Before Consolidating or Refinancing Student Loans

Whether or not you have Sallie Mae or other private loans, or are just considering applying for a Direct Consolidation Loan for your federal loans, it’s important to review your current payment plan and rates before consolidating loans. Ask yourself this: Will you save money overall, or will you wind up paying more over the life of the loan?

Refinancing Your Private or Federal Loans

For those with private student loans, federal student loans, or a combination of the two, refinancing is another option to consider. Unlike consolidation, refinancing with a private lender such as SoFi allows you to combine private and federal loans into one, and it may lower the amount of interest you’re currently paying or lower your monthly payment.

Refinancing may be better for people whose financial situation, including employment, cash flow, or credit, has improved since graduating. And just like with consolidation, refinancing gets you one loan, and one monthly payment, so you no longer have to juggle multiple loan servicers and payments.

No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
$500 Student Loan Refinancing Bonus Offer: Terms and conditions apply. Offer is subject to lender approval, and not available to residents of Ohio. The offer is only open to new Student Loan Refinance borrowers. To receive the offer you must: (1) register and apply through the unique link provided by 11:59pm ET 11/30/2021; (2) complete and fund a student loan refinance application with SoFi before 11/14/2021; (3) have or apply for a SoFi Money account within 60 days of starting your Student Loan Refinance application to receive the bonus; and (4) meet SoFi’s underwriting criteria. Once conditions are met and the loan has been disbursed, your welcome bonus will be deposited into your SoFi Money account within 30 calendar days. If you do not qualify for the SoFi Money account, SoFi will offer other payment options. Bonuses that are not redeemed within 180 calendar days of the date they were made available to the recipient may be subject to forfeit. Bonus amounts of $600 or greater in a single calendar year may be reported to the Internal Revenue Service (IRS) as miscellaneous income to the recipient on Form 1099-MISC in the year received as required by applicable law. Recipient is responsible for any applicable federal, state, or local taxes associated with receiving the bonus offer; consult your tax advisor to determine applicable tax consequences. SoFi reserves the right to change or terminate the offer at any time with or without notice.

SOSL18124

Considering the over trillion-dollar student debt-load carried by millions of graduates in the U.S., it’s not exactly a surprise that many are exploring options for what their repayment journey will look like. For those looking for a lower monthly payment, a common option is income-driven student loan repayment.

For some students, an income-driven repayment plan, could be the best available choice. For example, this may be the correct course of action for those planning on having their loans forgiven through the Public Service Loan Forgiveness program.

Other times, this might not be the best or most affordable option over the long run, even for those looking for a lower overall monthly payment. That’s because lowering your payments often means extending your repayment timeline, which could mean paying more interest over the life of the loan.

It can be hard to do an apples-to-apples comparison of the two common options (a student loan income-driven repayment plan via the federal government and a student loan refinance from a private lender). That’s simply because what a borrower might pay on an income-driven repayment plan varies from person to person. However, it is still possible to make an informed decision about which makes more sense for your financial and personal situation and money goals.

The first step is gaining a thorough understanding of both common options. Then, you can make an informed decision about which is a better fit to your life and goals. Below, we’ll look at some pros and cons of both.

Income-Driven Student Loan Repayment

To understand income-driven repayment plans, it helps to first wrap your head around a standard repayment plan. Most people who take out a federal student loan or loans are opted into a repayment plan parsed out over 10 years. But standard repayment might not be the best option for everybody, because those carrying high debt balances may have a sky-high monthly payment.

The federal government also offers four income-driven repayment (IDR) plans, which are need-based options where monthly payments correspond to your income. Depending on your income, and by stretching these payments out over as many as 20 or 25 years, monthly payments could be quite minimal compared to the standard 10-year repayment plan.

You may have already caught onto this, but a student loan income-driven repayment plan is only offered on federal student loans. Federal loans typically offer more flexibility in repayment than private loans, which are procured from a bank, credit union, or other lender.

If you are looking for some respite from your monthly payments on private loans, you’ll have to speak with each lender to see whether they can work with you. (That, or you can consider refinancing, which we’ll discuss below.)

While choosing one of these plans may help to lower monthly payments, they generally will not lessen how much you pay over time. Spreading your loan out over 20 or 25 years could actually increase how much you pay in interest.

Why does this happen? Because with a low monthly payment, the borrower might not be chipping away at much of the loan’s principal, on top of which interest payments are calculated. Even worse, if payments are too low they might not even cover the entire interest charge for the month, which means that interest is added to the balance of the loan (is capitalized).

Because your monthly payment amount is contingent on your income, your income and corresponding payments will be reassessed each year. This means that your monthly payments will likely fluctuate over time.

Loans on an income-driven repayment plans are often forgiven at the end of the 20 or 25-year repayment period. But, under the income-driven repayment plans, any amount that is forgiven will be taxed as ordinary income in the year that the loan is forgiven. For many graduates, this is a harsh realization in the year that the loans are forgiven, especially if the loan has grown in size over time due to capitalized interest.

Any person considering one of these plans in order to have their loans forgiven will want to seriously consider the implications of a hefty tax bill. You should consider how you will be prepared to pay this bill. Will you save extra each month for taxes, in addition to your monthly student loan payment? These are all questions that you may want to research on your own, and potentially discuss with your loan servicer or a financial advisor.

Refinancing Student Loans

People with a student loan or multiple loans, especially loans with higher rates of interest, could consider refinancing instead. With refinancing, the new lender will pay off a borrower’s old loans with a new one.

Depending on the lender, this can be done with both federal or private loans. Generally, the bank or lender evaluates a potential borrower’s financial situation to see if they qualify for a better interest rate. At this point, the potential borrower can also look at options for lengthening or shortening the repayment timeline. This is typically called “changing the terms” of your loan.

Let’s talk about what it means to change the terms of a student loan. In an ideal world, you’re either keeping the same term (or even shortening the term), and when combined with a (hopefully) better rate of interest, you’ll likely save some money on interest. But it doesn’t necessarily have to be this way. You could also extend the length of the loan, remove cosigners, change from a variable rate to a fixed rate, and so on.

Why might one extend the life of their loan via refinancing? Usually, a borrower would do this to get lower monthly payments than they have on a standard, 10-year repayment plan. To be clear, this could cost a borrower more over time even if the loan is refinanced to a lower rate. That said, for some borrowers it still may be a better option than switching to an income-driven repayment plan.

Of course, you’ll want to do a side-by-side comparison of both options, although that’s not a particularly easy task considering that you can’t really predict how much you’ll pay on an income-driven repayment plan over the duration of a student loan, because it varies depending on your income each year.

And with a 20-year fixed-payment refinanced loan, you’re actually paying off the entire balance of the loan. This means you won’t have any part of the loans forgiven, which saves you from a potentially high tax bill .

Something else to consider: When you do a 20-year refinance that allows you to pay extra toward your loans without penalty, you can pay your student loans back faster than the 20-year period. For example, you could potentially pay a 20-year loan back in 10 years by making extra payments, all while keeping the flexibility of the resulting lower monthly payment.

Every lender has their own criteria for determining whether someone qualifies for particular types of loan and at what rates, but it’s usually based on credit score and history and your income (and may include other factors).

When is refinancing not a good idea? Basically, if you are ever planning to use one of the federal loan repayment or forgiveness options, like Public Service Loan Forgiveness. Because refinancing is the process of paying off loans with a private loan, refinancing federal loans with a private lender means you won’t have access to these federal repayment programs anymore.

At the end of the day, it’s up to you to make an informed decision about which of the two options is best for you and your financial situation. Good luck in your journey and in paying back your student loans!

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice about bankruptcy.
SLR18246

It’s not exactly a surprise that the average American has plenty of debt . Households with credit card debt carry an average balance of over $15,000. Frustratingly, these debts often come with exorbitant interest rates.

While some folks are able to manage their debts just fine, some may feel overwhelmed juggling loan payments of varying sizes with due dates scattered throughout the month. When life gets busy, missing a payment is too easy and can land you even further behind. Having multiple debts can be stressful and can make budgeting and planning for the future challenging. And let’s be real: No one likes feeling overwhelmed by multiple debt payments.

For most people, the goal with paying back debt—especially consumer debt, like credit card debt—is to do so as quickly and painlessly as possible. If this is your goal, you have options. One of those options is debt consolidation, where you pay off qualifying debts using a new loan, often called a “debt consolidation loan” or a “debt relief loan.” To determine whether consolidating your debts into one single payment is the right choice for you, read on.

Should I Consolidate My Debts?

It may be worth considering consolidation if it will help you simplify your finances and lower the amount of interest you pay overall on your combined sources of debt. For example, if you have multiple credit cards and each has a high interest rate, consolidating to one loan with a lower interest rate could get you out of debt sooner. That, and you could enjoy the sweet relief of only having one payment to manage for the debt you consolidated.

Consolidating your credit cards to a lower interest rate with a debt consolidation loan could help you get out of debt sooner.

Pros of Debt Consolidation

1) You can streamline multiple debts into one payment, making the payback process easier and more efficient.

2) If you consolidate your debt, you may pay less interest over the life of your loan.

3) Consolidating credit card debt can lower your revolving credit utilization ratio, which is a factor considered by most credit bureaus in the calculation of credit scores. If you lower your balance on several credit cards, but keep them open, you’ll decrease your credit utilization ratio. That’s a good thing! Revolving credit utilization ratios are also often considered by lenders when making credit decisions.

That said, debt consolidation isn’t for everyone. Taking out a new loan may come with fees, so you’ll want to do the math and make sure it’s worth it before moving forward. You should also be mindful of the repayment period and ensure you only finance the debt on a timeline that works for you. Be wary of a loan term that’s too long—even if the loan has a lower interest rate, you can pay more in interest over time with longer repayment periods.

Cons of Debt Consolidation

1) If the loan term is longer than necessary, you could potentially pay more in interest even if the rate is lower.

2) Some debt consolidation programs are scams. It is important to understand that not all loan consolidation tactics are created equal. There have been some unsavory and even fraudulent loan consolidation services that don’t really help get your debt under control. If a lender is asking for money upfront to consolidate your debt, for example, that’s a red flag.

How Do I Consolidate My Debt?

Debt consolidation, in theory, is very simple. You, or a lender, pays off all of your unsecured debts (like credit cards and personal loans) using a new loan. Then, moving forward, you’ll only make one monthly payment on your new loan.

A “debt consolidation loan” or a “debt relief loan” is often just a personal loan. This means that you have the option to seek out personal loans from reputable banks, credit unions, or online lenders. You do not have to work with a debt consolidation services provider that you don’t feel 100% comfortable with. Think of it this way: If it sounds sketchy, it probably is.

When it comes to low-rate personal loans, at SoFi we pride ourselves on transparency and a level of customer service unmatched in the lending industry. Also, our personal loans come with no origination fees, prepayment penalties, or late fees.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit.