February 7, 2020
By Ryan Lane, NerdWallet
Multiple studies have shown that student debt can cause borrowers to delay getting married. For some borrowers, though, marriage could actually be a gateway to paying less.
You can save money by refinancing student loans, but not everyone qualifies. If your better half has a better financial profile, you can share the benefits of refinancing in two ways:
— REFINANCE TOGETHER. You combine your student loans with your partner’s into one spousal loan with a lower interest rate.
— CO-SIGN FOR YOU. Your spouse co-signs a loan refinancing your debt, getting you a lower rate on the back of his or her finances.
If you’re considering getting hitched to your partner’s loans, here’s how to decide if you should.
REFINANCING ‘FOR BETTER’
Refinancing makes the most sense to save money on higher-interest private and graduate school loans.
For example, by refinancing a $60,000 loan from 7% interest to 5%, you’d save roughly $7,200 over a 10-year term.
Typically, you’ll need robust finances and a good credit score to qualify and get the best rate.
Spouses may “increase (their) chances at getting a better rate together,” says Andrew Zoeller, digital program director for Purefy, which refinances loans for Pentagon Federal Credit Union, or PenFed.
For joint spousal loans and loans that spouses co-sign, PenFed evaluates the couple based on their combined income and counts shared debts, like mortgages, only once. This allows more individuals — such as stay-at-home parents with good credit — to meet PenFed’s lending criteria.
Other lenders may evaluate spouses separately. Ask a lender about its policy before applying.
In 2019, 67% of co-signed PenFed student loan refinances were spousal loans, according to Zoeller.
“It’s something our program is known for,” he says.
REFINANCING ‘FOR WORSE’
If you co-sign a refinancing loan or combine debts with your spouse, you’re equally responsible for repaying the balance — even after a divorce.
“There is no exit ramp,” says Joshua R.I. Cohen, a lawyer in West Dover, Vermont, who operates TheStudentLoanLawyer.com.
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