Should You Consolidate Your Student Loans After Marriage? What Couples Need to Know.

Did you recently tie the knot? If so, you’re probably going through some major changes, including changes in your financial life.

If you and your spouse both have student loan debt, the payments could be eating up a big chunk of your income. After all, if you’re like the average borrower, each of you individually owes somewhere in the neighborhood of $39,000.

One thing you and your spouse might consider is discussing your student loan debt with each other, and exploring new repayment strategies together. The best option could be consolidating the loans, meaning you combine them into one new loan. But whether or not it’s the right move depends on your circumstances.

What is debt consolidation for student loans?

Debt consolidation is the act of taking out a new loan or credit card and using it to pay off multiple old loans. This is called “consolidating” since it allows you to roll several accounts and payments into one.

Most student loan borrowers have multiple loans. If you have more than one student loan, consolidating them could make your life easier in a few ways:

• Reduce the total number of accounts you have to monitor
• Reduce the number of debt payments you need to make each month
• Potentially reduce your monthly payments

How can loan consolidation reduce your monthly payments? If your new loan has a lower interest rate and/or a longer repayment term than your old loans, the monthly payments will likely be lower. Just note that having a longer repayment term means paying more in interest charges overall.

Is student loan consolidation worth it for married couples?

The benefits and drawbacks of student loan consolidation will vary from one couple to the next. Here’s a breakdown.

Consolidating federal student loans

Consolidation can be tricky for couples with federal loans. The Department of Education (ED) only allows you to consolidate loans that are in the same name. So if you both have federal loans and you want to combine them, private refinancing is the only option. But it’s not a good one.

When you consolidate into a private loan (which you can do through banks, credit unions or other lenders) you lose all the special payment options that come along with federal loans, such as income-driven repayment (IDR) plans.

To learn more about your options for federal student loans, use the ED’s Loan Repayment Simulator. 

Consolidating private student loans

If you have private student loans, the choice to consolidate should be easier. It will ultimately depend on whether or not you qualify for a consolidation loan that gives you more affordable payments and/or a lower interest rate.

To get started with this option, research credit unions or banks and see how their loans compare with your current student loans. Before you apply, we recommend pinpointing the following figures for your current debt:

• Your total combined debt for the loans you want to consolidate
• The total amount of your current monthly student loan payments
• Your interest rates on each of your student loans
• Your timeline to pay off each loan
• The total cost of interest for your remaining loan payments

You can use a free student loan calculator, like the one available at Calculator.net, to help you find some of these figures.

Why do you need these numbers? Because they’ll help you compare consolidation loans to your current loans and figure out if the new option is really a better deal.

Other considerations for couples with student loans

When you’re navigating your finances as newlyweds, there are some key decisions you’ll need to make together. 

One of them is whether or not to change your tax filing status. If you change your status to “Married Filing Jointly,” your spouse’s income could disqualify you from any income-driven payment plan you’re on for your federal student loans. As a result, your payments could skyrocket.

On the other hand, if you choose “Married Filing Separately,” you can lose certain tax benefits that come from marriage. For that reason, we highly recommend speaking to a tax professional or financial advisor before you decide how to file.

Another less pleasant consideration is what will happen if you ever divorce. If it happens one day, you may be required to split the debt evenly, even if most of the debt came from your spouse. A similar drawback occurs if one of you passes away before the debt is paid off. If you have a private lender, they will likely require the surviving spouse to pay off the debt.

Get expert help with student loan decisions

If you’re struggling to decide which option is best for you and your spouse, reach out to one of our certified credit counselors for student loan counseling. Your counselor can look at your entire loan portfolio, review your credit, and help you decide which path is best for you and your family!