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.
If you co-sign a refinancing loan or combine debts with your spouse, you’re equally responsible for repaying the balance — even after a devorce.
For example, Cohen says a divorce decree could outline who’s responsible for repayment, but both names remain legally on the debt. That means if one spouse doesn’t pay, the other still suffers the consequences of missed payments, like damaged credit and collection calls. Divorcees could refinance the loan or portions of it into their individual names to get around this, but only by meeting a lender’s income and credit qualifications on their own. SHOULD YOU SAY ‘I DO’? Still have cold feet about refinancing with your spouse? These steps may help protect you: TRY CO-SIGNING FIRST. Co-signing may have a valuable option that spousal loans lack: programs that eventually remove your spouse from the loan. Co-signer release policies vary by lender; PenFed, for example, doesn’t release spouse co-signers. GET EXTRA LIFE INSURANCE. Cover yourself if your partner dies and you have to pay a hefty spousal loan on your own. You may owe the balance on a co-signed loan as well, depending on a lender’s policies. KNOW WHAT YOU’RE GIVING UP. Once you refinance loans, you can’t get your original loans back. If you want or need federal loan benefits, like alternate repayment plans and forgiveness programs, don’t refinance them. Cohen also says to make sure the savings are worth it. “I would rather pay 2% more in interest and know I’m not tied to this idiot for the rest of my life,” he says.
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