Consolidating Student Loans with a Spouse: What You Should Know

When you say “I do,” it’s common to merge your finances.If you both borrowed funds for college, you might want to consolidate student loans with your spouse for one simple monthly payment.That sounds like a no-brainer, right? Before making any changes, read on to learn more about spousal consolidation loans and what to consider.Can I consolidate student loans with my spouse? If you want to consolidate student loans with your spouse, you are out of luck.

The federal government no longer offers spousal consolidation loans for student loan debt.The U.S.Department of Education offered joint consolidation loans, also called spousal consolidation loans, from 1993 to 2006.It let two married federal student loan borrowers combine their loans into a single consolidation loan.

A consolidation loan pays off your old loans, leaving you with one new loan and one monthly payment.It's a process that can help streamline the repayment process.Instead of separate monthly payments, you have one joint consolidation loan.The idea might sound good in theory.

But in practice, this form of student loan consolidation has many issues.The problem with spousal consolidation loans Spousal consolidation loans may seem like a simple fix — a solution to an already complicated repayment process.But if you want to get out of student debt, it’s going to be much harder.First, you’re each on the hook for the consolidation loan.

It may not seem like a problem throughout the life of the loan, as long as you stay married.But for those who split up, it can quickly become problematic.Spousal consolidation loans after divorce If you’re like nearly half of all married couples in the U.S.and head toward divorce, your student loan situation could become a nightmare.

Spousal consolidation student loans and divorce can get very messy.Here’s how: Not eligible for Public Service Loan Forgiveness (PSLF).Only Direct loans are eligible for PSLF.If your joint spousal is a FFEL loan and not a Direct loan, you can no longer apply for this loan forgiveness program.

Needing to stay in contact after a split.It’s tough to “move on” when you have to make 10 years of payments with your ex and tackle the loan balance.It can be awkward to have an ex-spouse lingering in your life due to an unpaid joint spousal loan.It is challenging to make your student loan payments more affordable.

If you want lower monthly payments and better repayment terms, things could get messy.Both parties must submit income information if one party wants to take advantage of income-based repayment options.That may be asking a lot of your ex, especially if you’re not on the best terms.Difficulty with Total and Permanent Disability Discharge.

If you or your ex becomes permanently disabled, the disabled spouse may be able to discharge their respective amount of the loan.But even then, both spouses — or exes — are on the hook for the remaining balance.On top of all of this, if your joint consolidation loan goes into default, your options to get into good standing are limited.One standard option to get out of default is to consolidate your loans with a Direct Consolidation Loan.

However, Spousal FFEL Consolidation loans can't be re-consolidated because there are joint borrowers.In which case, the only remaining option is student loan rehabilitation… until recently.Great news for borrowers with spousal consolidation loans The Joint Consolidation Loan Separation Act became law in 2022, allowing spousal consolidation loans to be split between the two borrowers based on the proportion of debt that each borrower brought into the loan.For example, if you brought in 40% of the debt, you'll be responsible for 40% of the remaining balance.

The split allows you to consolidate into individual Direct Consolidation Loans, opening the door for income-driven repayment (IDR) plans and the PSLF program.The Department of Education offers a joint application to separate a joint consolidation loan.But there's also a separate application for borrowers who have experienced domestic violence, economic abuse or are unable to reasonably access the other co-borrower's loan information.Is refinancing a possibility? The federal government no longer offers spousal consolidation loans.

But there are options to merge your loans if you’re married (and the above examples didn’t scare you away).Spousal refinancing If you want to consolidate student loans with your spouse, look at refinancing offers from banks and credit unions, like PenFed.Through PenFed, married couples can apply for spousal refinancing.Note that link connects you with Credible, which has a cash-back bonus and utilizes PenFed as one of its platform lenders.

Under this process, PenFed combines your income and looks at your credit history.It uses the higher credit score between you and your spouse to get you the best rate.Through student loan refinancing you may get a lower interest rate.This is notable as many refinancing companies do not allow married couples to refinance their loans together.

Refinancing to ditch your ex is rare and can strongly depend on the lender and your ex’s consent in the matter.A joint consolidation loan consists of two legal borrowers.To refinance, you both must consent to it, and you must choose a lender that allows it.What to consider before refinancing Carefully consider refinancing, especially if you have federal student loans.

Refinancing your student loans means going through a private lender to pay off your federal student loans, and your current loan amount with your current loan servicer will be gone.You'll just have the student loan refinance debt left, hopefully at a lower rate.Given that you'll essentially have a private student loan afterward, you’ll lose federal protections like income-driven repayment or student loan forgiveness.You must also consider what could happen if you divorce after refinancing your two loans together.

If you’re curious about your options, ask the refinancing companies about possible new loan terms, repayment plans, and eligibility.Some things are better separate Some things are better to keep separate, including your student loans.After all, there’s a reason joint consolidation loans are no longer available.Consolidating student loans with your spouse is no longer an option, which is probably for the best.

If you want to get out of an existing spousal consolidation loan, you can apply to separate the joint loan by consolidating into individual Direct Consolidation Loans.This will keep both of your student loan debts within the federal system, providing better borrower benefits.And if you really want to consolidate your student loans together, you might be able to find limited refinancing options with a private lender.Whether you’re divorced or still married, stay on top of your payments and remain in good standing with your student loans.

Did you know spousal consolidation loans were an option? Is it something you and your spouse have considered?