If you’ve tied the knot with a college graduate, there’s a good chance they have student loan debt. If this applies to you, it’s important to familiarize yourself with how their student loans may affect your financial situation.
Typically, you aren’t responsible for your spouse’s student loans. However, there are some situations where you may be on the hook for them.
There also may be better repayment options available to make paying off student debt easier on you both — like spouse student loan refinancing, for example.
So let’s dive deeper into student loans and marriage so you can get an idea of what to expect when marrying someone with student loan debt — and learn solutions to better manage them together.
When you say “I do” to someone with student loan debt, it’s essential that you’re mindful of the possible refinancing solutions and financial implications.
Refinancing Student Loans as a Cosigner: If your spouse’s student loans have high rates, they may want to refinance so they can save on interest costs. They can always see if they can qualify on their own, but if they don’t have the best credit or income, they may ask you to cosign on their refinance loan so they can land a lower interest rate. This is particularly true if you have a significantly better credit score than your spouse. Keep in mind that if you do cosign on their loans, you’ll be responsible for making payments if they fail to do so.
Refinancing Student Loans Together: Do you and your spouse both have student debt? If so, PenFed Credit Union offers a unique solution — a spousal consolidation loan. This refinances your debt and your spouse’s together into one new loan with a new interest rate and repayment term. With a spouse student loan refinance, your combined income and debt — rather than your spouse’s alone — determines whether you’ll be approved for a new loan. The highest credit score in the marriage is also what’s used to determine your new interest rate. This can help greatly reduce interest costs across all your loans if one person in the marriage has a much higher credit score.
For both of these options, you can check rates to see whether you qualify and what rates you pre-qualify for using PenFed’s Find My Rate tool, which has no impact on your credit score. If you want to refinance both your and your spouse’s loans together, include both loan balances with the primary applicant’s information.
Changes to Income-Driven Repayment Plans: In the event your spouse is on an income-driven repayment plan for their federal student loans, marrying you may affect their payments. Here’s how: If you decide to file your taxes jointly, both of your incomes will be combined into a single adjusted gross income. This may disqualify your spouse from certain income-based repayment plans. Consult a tax professional if you’re unsure of how your marriage may affect your spouse’s plan.
Roadblocks to Your Financial Future: Your spouse may have a very high student loan payment that can take a serious toll on your financial future as a married couple. Their student loan debt may force you to delay life milestones like buying a house or having kids. So it’s essential that you discuss the consequences your spouse’s student loans may have on your finances and have a plan to manage them effectively within your monthly budget.
Whether or not you’re responsible for your spouse’s student loan debt depends on when they took out their student loans as well as where you live.
When You’re Not Liable for Your Spouse’s Student Loans: If your spouse borrowed money for their education before you got married, you are generally not responsible for their student loans.
When You Are Liable for Your Spouse’s Student Loans: If your spouse decides to pursue a degree after you tie the knot and pays for it with student loans, your location may dictate whether or not you’ll be responsible for them. If you live in one of these community property states, you may wind up sharing the student loan debt with your spouse. This generally holds true regardless of if their loans are federal or private.
There are several advantages to refinancing your spouse’s student loans — either as a cosigner or through a spousal student loan consolidation with PenFed Credit Union:
Simplified Payments: If your spouse has multiple student loans from various lenders, refinancing can give them the chance to combine them into a single manageable loan. This means they’ll only have one payment to make each month and can make it easier for you to budget and see where you both stand financially.
Lower Interest Rate: Your spouse may be able to lock in a lower interest rate on their student loans and save a lot of money as a result. You can use this extra money to save for a house, travel the world, boost your retirement savings, and meet any other goal you may have as a couple.
Flexible Terms: Your spouse will have the opportunity to refinance into a 5, 8, 12, or 15-year term. This can allow them to get rid of their student loans faster and put their hard-earned money toward other financial priorities you both have.
Fixed or Variable Interest Rate: Refinancing may also allow your spouse to choose a fixed or variable interest rate. They may be able to score a lower rate if they go the variable route but should only do so if you're both okay with the rate — and monthly payment — fluctuating over time. On the other hand, a fixed interest rate can give you both the peace of mind of knowing your monthly payment will never change.
If you know your spouse has student loan debt, take the time to discuss how you’ll handle it in your marriage. Will you help them pay it off, even if you may not be legally responsible for it? Would you prefer for them to take care of it on their own?
There’s no right or wrong way to take care of student loan debt in a marriage. As long as you and your partner come up with a game plan and are on the same page financially, their student loans shouldn’t be a big deal.
A great place to start is to check out how much you could save by refinancing with PenFed’s Find My Rate tool.