Consolidating Student Loans with a Spouse: The Good, The Bad and The Ugly

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.

Through a consolidation loan, your old loans are paid off. You’re left with one 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 without a way to sever ties if you want out. It may not seem like a problem throughout the life of the loan, as long as you stay married.

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.
• Being forced 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 option to get out of default is to consolidate your loans with a Direct Consolidation Loan.

But since your loans are already consolidated, you’ll have to go through student loan rehabilitation instead. In other words, student loan repayment can be a difficult process with these types of loans.

Attempts to fix spousal consolidation loans

As of 2021, the Joint Consolidation Loan Separation Act was introduced in the house. The act would create an application to cut ties with the joint loans in specific cases. Particularly in cases of domestic violence or economic abuse or if the other borrower is unreachable.

So far it seems that it’s just been introduced, not passed into law.

If you are dealing with spousal consolidation student loans after divorce, we feel for you. There’s not much you can do — whether you’re still married or not — unless legislation changes.

Is refinancing a possibility?

Though the federal government no longer offers spousal consolidation loans, it has 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. (That link actually goes to 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 may look into refinancing, but the likelihood of succeeding is slim.

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?