If you and your spouse have student loan debt, you may have the option to consolidate those loans, simplifying your repayment. The key, however, is knowing which types of consolidation are available to you, as well as the associated pros and cons.
Here’s what you should know about consolidating student loans with a spouse:
Consolidating is the process of combining your loans, offering a way to streamline your finances since it would mean having a single payment due date, rather than several.
“Consolidating student loans with a spouse can be beneficial in several ways. For example, it can help to simplify the payment process, score a lower interest rate, and potentially reduce the monthly payment,” says Dennis Shirshikov, an adjunct professor of finance and economics at the City University of New York. “It can also make it easier to manage finances as a couple.”
For married couples and significant others, however, consolidation options are somewhat limited. And while a single person can consolidate their own loans via the federal government or refinancing with a private company, couples would only have the latter option if they want to truly combine that aspect of their finances.
The Department of Education offers the Direct Consolidation Loan program, which lets individuals (not couples) combine their own federal student loans. Most borrowers with federal loans qualify for consolidation after they’ve left school, graduated, or dropped below half-time enrollment. And depending on the types of federal loans you have, it may help you qualify for federal protections like income-driven repayment plans and student loan forgiveness.
If you go with the Direct Consolidation Loan program, the interest rate on your consolidated loan is typically the weighted average of your existing rates, rounded up — and it’s fixed. So, even if your credit isn’t stellar, you wouldn’t have to worry about suddenly upping your rate when you consolidate via the government.
For example, if you have one federal loan tagged at 6.00% interest and another carrying a 6.40% rate, your rate on a Direct Consolidation Loan would be about 6.25%. (On the other hand, if you have excellent credit, it may be a higher rate than you’d be able to get from a private lender. But keep in mind that refinancing federal loans with a private lender would mean giving up federal protections, like deferment and forbearance options. More on refinancing below.)
There are a few drawbacks to consolidating federal loans, though:
- You can’t consolidate federal loans with a spouse since the federal government discontinued that option in 2006.
- Consolidating federal loans can extend your repayment term, which could mean you’d pay more in the long run.
- If you don’t have Direct Loans, consolidating could mean giving up perks like interest rate discounts and principal rebates.
You can apply for federal consolidation either online or via mail. Once that’s completed, your federal student loan servicer will handle the consolidation process.
Once you consolidate federal loans, you may have the option to access several helpful repayment plans, including:
With these plans, any unpaid amount is forgiven once you’ve hit 20 or 25 years, depending on the plan and the type of education the loan was used for (undergrad or graduate). There are also standard, graduated, extended, Pay As You Earn (PAYE), and Income-Sensitive repayment plans available, but those don’t offer forgiveness.
The best plan for you will depend on your needs. Evaluate your options via the Federal Student Aid’s Loan Simulator: Once you log into your account, the tool can automatically pull that information in, giving you a quick, clear overview.
Student loan refinancing can offer a way to consolidate loans for married couples. That would mean applying for a new loan, which would be used to pay off existing ones. Then, your new interest rate would be based on your combined creditworthiness. Primary eligibility criteria include:
If you’re seeking a spousal consolidation loan, things could get tricky if you or your partner have a lower credit score or higher DTI.
“If one spouse has a significantly higher income or debt-to-income ratio, it could affect the interest rate and terms of the loan,” explains Shirshikov. “Additionally, if one spouse defaults on the loan, it could negatively impact the credit score of both individuals.”
For context, the average rates for 10-year refinanced loans was 6.22%, as of mid-February 2023. And APRs for variable 5-year refinanced loans were 4.79%.
In general, refinanced student loans don’t carry any origination fees or prepayment penalties. That said, many of these loans will only have one repayment plan (though it will depend on the lender), whereas federal loans offer several repayment plans.
Pros, cons of consolidating with your spouse
| Pros | Cons |
|---|---|
| – Single monthly payment – Having your finances under “one roof” – Lower interest rate or better repayment term | – Losing privileges of original loans (particularly if they’re federal) – Stiff eligibility criteria – Not all lenders offer spousal consolidation loans |
PenFed is among few lenders that offer so-called spousal consolidation loans. If you’re looking to consolidate student loans with a significant other (unmarried), you’ll likely have even fewer lender options.
Related: Learn more about refinancing your student loans on Credible.com
If you don’t qualify for student loan refinancing on your own, adding a cosigner can help. A cosigner is someone (perhaps your spouse) who agrees to vouch for you, so if you fall behind on the monthly payments, the cosigner would be required to make those payments.
That’s why lenders require cosigners to meet certain requirements for income, debt, and credit. It’s also why a cosigner can help lower your rates — their good credit allows you to access better terms, like a lower rate.
Because cosigners need to be willing to put their credit on the line, though, you’ll probably find the best luck asking a close family member, rather than a friend. Your spouse may be able to cosign on the loan. In fact, this can act as a kind of workaround if you aren’t able to find a lender you like that offers joint refinancing, Shirshikov says, or if you and your partner aren’t married.
Related: Learn more about refinancing your student loans on Credible.com