When you get married, many separate things tend to become one. Being a married couple you may have to experience a lot of new changes in your daily lifestyle. You might also have to make various financial decisions, like combining both of your finances by opening a joint account.
The same can happen with your student loan debt. When you are a bachelor, your student loans have a different impact on each of your credit scores, as both of your papers are separate as well as credit reports.
But once you are married, one of your debts may harm the other’s credit score. Couples can handle their love life and debt separately with their own earning. Some couples opt for a new method; they choose to consolidate their student loans through a student loan refinance option.
If both of you have student loans separately, then you may try to consolidate your student loans under any one of your names. You might be interested in consolidating your debt together so that it’ll be easier to share repayment responsibilities and get out of debt soon.
Can you consolidate student loans with a spouse?
After graduating from the college, you might have multiple student loans on your shoulder, and possibly your spouse have it too. It may become difficult to manage both of your student loan debt with multiple lenders, monthly student loan payment, and track several due dates.
The stress due to this type of debt can take a toll on your mental health. And gradually, it may affect your libido. Approximately one-third of borrowers stated to have experienced a decrease in their sex drive due to student loan debt stress.
Refinancing student loans after marriage can combine both of your existing student loans into a single larger loan. Many times, student loan borrowers might have multiple other loans, so through consolidation, it can be easier to handle them. However, if you have taken out the loan under a Federal Student Loan program, you cannot consolidate the loan with a private student loan under the same name.
So, how do you consolidate both of your student loans? You need to find a private refinancing company and approach to them. These private refinancing companies may allow student loan consolidation with a spouse, but you must remember that you’ll lose all the benefits of federal student loan. These benefits may include access to income-based repayment programs, eligibility for deferment and forbearance, and eligibility for student loan forgiveness.
Both federal and private student loans are eligible for refinancing through a private lender. But before refinancing both of your student loans together, you must ask a few questions to yourself:
- Which loans should you tackle first?
- What money investment can you put on hold?
- How will you make monthly payments?
- Can your tax status affect the income-based repayment plan?
- Who’s going to handle the payments?
- What do you expect from the student loan refinancing?
- Do the refinancing fit in with your other financial goals?
Find out all the answers first. Then have a look at these pros and cons and decide if refinancing your student loans with a private company will work best for you.
Pros and cons of consolidating both of your student loans after marriage
a) Pros of consolidating student loans with a spouse
Refinancing student loans after marriage can sound appealing. So, if you want to consolidate your student loan with your partner, it will make a lot of sense. Here are some unique advantages of it:
1. You can manage the total debt with one easy payment
If you and your spouse have multiple student loans, it might become a headache to keep track of those due dates and multiple payments, every month. While handling so many accounts, it’s quite easy to make mistakes and forget payments. This may hurt your credit score and even cause you heavy late fees.
While opting for spousal loan refinancing, you may consolidate your multiple student loans into one. After doing so, you’ll have one due date to remember and one easy monthly payment to make.
2. You might save thousands from your wallet
When you and your spouse want to combine your loans and apply for a refinance, the lender might check both of your income and credit reports. So, both of your credit score and credit history will be evaluated while determining the new refinance loan terms. If one of your records are good, and your income and creditworthiness have a decent level, you might be eligible for a lower interest rate.
If both of you can qualify for a lower interest rate, you can easily manage to save a decent amount over the total loan period.
3. You could get a long term with a lower monthly payment
When you take out the refinancing loan to consolidate both of your student loans, you can choose a repayment term that suits you the best. If you have a shortage of money or having a financial hardship, you can opt for a longer repayment term. So, it’ll reduce your monthly payment to a significant level.
It is right that if you go for this method, you’ll pay more in interest over the length of the loan. But, on the contrary, you have a breathing space every month from paying a good amount that may harm your budget.
b) Cons of consolidating student loans with a spouse
While consolidating your student loans with a spouse comes with good benefits, there are some potential drawbacks also that you should consider before making the final decision.
1. You have to give up all the federal benefits and protections
You need to work with a private lender and refinance your student loans if you want to consolidate your loans together. If you have federal student loans (loans from the Department of Education) along with private student loans, you have to refinance the loans through a private lender. But don’t forget you have to let go all special federal benefits and protections when you refinance. These may include:
- Income-driven repayment (IDR) options:
It may be available based on your income and loan balance. With an IDR plan, your loan payments will be set at a percentage of your current income. If you refinance through a private lender, you’ll lose access to IDR plans altogether.
- Loan forgiveness:If you refinance your student loans through a private lender, you’ll lose the privilege to opt for the Public Service Loan Forgiveness program.
- Loan discharge:With federal loans, you may opt for a special option where your student loans could be discharged. For example, if you or your spouse become disabled due to any reason, you may apply for Total and Permanent Disability Discharge. But if you refinance, you’re no longer eligible for the loan discharge option.
2. You might have to carry your spouse’s debt even after a divorce
Unfortunately, if your marriage ends up in divorce, you still have to make payments on the refinance loan every month, considering the loan is taken out by both of you.
Any debt that is taken out before your marriage is solely yours. After the marriage, your spouse isn’t responsible for the student loans you borrowed while in college. If you divorce, the debt remains in your name.
If you consolidate your student loans with your spouse and refinance the loans in both of your names, both of you are equally responsible for paying off the debt. Even after a divorce, if one of the partners doesn’t keep up with the loan payments, the other one is still responsible for making them. If the 2nd person is you, it may affect your budget drastically.
So, you need to keep these cons in mind and make your final decision regarding student loan refinancing after marriage. But if you consider overall benefits and drawbacks, spousal loan refinancing can be a wise solution to help you manage your student loan debt.
So, do your homework and understand all the pros and cons of consolidating student loans together, and make the right choice for your family.