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You may have heard that consolidating your debts can hurt your credit score. So, if you’re considering this financial strategy to free up cash flow and otherwise streamline debts, it’s natural to wonder if that’s true. And like so many questions related to finances, the answer depends upon your specific situation.

It’s important to remember that a combination of many factors can affect credit scores and to understand how those factors are considered in credit score algorithms. We’ll use FICO® as an example—according to them, the high-level breakdown of credit scores is as follows:

•  Payment history (35%): This includes delinquent payments and information found in public records.

•  Amount currently owed (30%): This includes money you owe on your accounts, as well as how much of your available credit on revolving accounts is currently used up.

•  Credit history length (15%): This includes when you opened your accounts and the amount of time since you used each account.

•  Credit types used (10%): What is your mix? For example, how much is revolving credit, like credit cards? How much is installment debt, such as car loans and personal loans?

•  New credit (10%): How much new credit are you pursuing?

Now, here is information to help you make the right debt consolidation decision.

Benefits of Debt Consolidation

When you’re juggling, say, multiple credit cards, it can be easy to accidentally miss a payment. Depending on the severity of the mistake, that can have a negative impact on your credit score. This, in turn, can make it more challenging to get loans when you need them, or prevent you from getting favorable loan terms, like low interest rates. Plus, even if you don’t miss a payment, when you have numerous credit card bills to juggle, you probably worry that one will get missed.

Plus, it’s not uncommon for credit cards to have high interest rates, and when you only make the minimum payments on each of them, you very well may be paying a significant amount of money each month without seeing balances drop very much at all.

So, when you combine multiple credit cards into one loan, preferably one with a lower interest rate, it’s much more convenient, making it less likely that you’ll accidentally miss a payment. And paying less in interest will likely make it easier to pay down your debt.

How you handle your debt consolidation, though, and the way in which you manage your finances after the consolidation each play significant roles in whether this strategy will ultimately help you.

Steps to Take: Before the Debt Consolidation Loan

Debt accumulates for different reasons for different people. For some, unexpected medical bills or emergency home repairs have served as culprits. For others, being underemployed for a period of time may have caused them to start carrying a credit card debt balance. For still others, it may be about learning how to budget more effectively.

No matter why credit card debt has built up, it can help to re-envision a debt consolidation strategy as something bigger and better than just combining your bills. As part of your plan, analyze why your debt accumulated and be honest about which ones were under your control and which were true emergencies.

And if you end up using a lower-cost loan to consolidate your bills, consider using any money saved to build up an emergency savings fund to help prevent the accumulation of credit card balances in the future.

The reality is that, if you consolidate your debts in conjunction with a carefully crafted budgeting and savings plan, then debt consolidation can be a wonderful first step in your brand-new financial strategy.

Debt Consolidation: When It Can Help Your Credit Score

Based on the factors used by FICO, here are ways in which a consolidation loan can help credit scores:

Payment history (35%)

Because making payments on time is the largest factor in FICO credit scores, a debt consolidation loan can help your credit if you make all of your payments on time.

Amount currently owed (30%)

Although you may not instantly reduce the amount you owe by, say, consolidating all of your credit card balances into a personal loan, there can be a benefit to your credit score here. That’s because the credit score algorithm looks at credit limits on your cards, as well as your outstanding balances, and creates a formula that calculates your credit card utilization.

Here is more information about credit card utilization, including how to calculate and manage yours.

Credit types used (10%)

As you may know, there are several different types of credit, such as credit cards, retail accounts, installment loans, finance company accounts, and mortgage loans. According to myFICO , responsibly using a mix of these, such as credit cards and installment loans, may help your credit score.

However, it’s certainly not necessary to have one of each, and it’s not a good idea to open credit accounts you don’t intend to use.

Debt Consolidation: When It Can Hurt Your Credit Score

Now, here are ways that the same initial step—taking out a debt consolidation loan—may hurt your credit.

Payment history (35%)

As is the case with most loans, making late payments on a consolidation loan can hurt your credit score (depending on the severity of the situation). Loans in a delinquent status are mostly likely to have a negative impact on your credit, depending on the lenders’ policies.

Learn more about payment history .

Amount currently owed (30%)

Now, let’s say that you pay off all your credit cards with a personal loan and then you begin using them again to the degree that you can’t pay them off monthly. Any gain that you saw in your credit score will likely disappear as your credit utilization numbers rise again.

Another way that credit consolidation can harm your score is if you combine all of your credit card balances to just one credit card, resulting in a high utilization rate. But if you are able to keep it relatively low, it is less likely to negatively affect your score.

Learn more about amounts owed .

Credit history length (15%)

If you close credit cards that you pay off, you’ll reduce the age of your accounts, overall, and this can hurt your credit score.

Learn more about length of credit history .

Credit types used (10%)

If you combine all of your credit card balances into just one credit card, as described above, you won’t have opened an installment (personal) loan, so that won’t help with diversifying credit types.

Learn more about credit mix .

New credit (10%)

If you apply for a personal loan or a balance-transfer credit card and are rejected, this can cause your credit score to decrease. And if you apply for multiple loans or credit cards, looking for a lender that will accept your application, this can also hurt your score. Multiple requests for your credit report information (known as “inquiries”) in a short period of time can decrease your score, though not by much.

Learn more about new credit .

Concerned about building or rebuilding credit? Check out a few tips SoFi put together on how to strategically boost your credit score.

Investigating a Personal Loan for Debt Consolidation

When it’s time to apply for the personal loan, you’ll want to get a low rate. In February 2019, the average credit card interest rate was reported as 17.67%; this means that, by not consolidating your credit cards into a personal loan with a lower interest rate, you could be paying more interest than if you did.

When choosing a lender, ask about the fees associated with the loan. Some lenders charge fees; others,like SoFi, don’t. You can always use a lender’s annual percentage rates (APRs) as a way to understand the true cost of financing.

Also, you may consider calculating the shortest loan term that your budget can comfortably accommodate because, the more quickly you pay off the debt, the more money you’ll save over the life of the loan because you’re paying less in interest.

You can find more information about saving money as you consolidate your debts, and you can also calculate payments using our personal loan calculator.

Consolidate Your Debt with a SoFi Personal Loan

If you’re ready to say goodbye to high-interest credit cards and to juggling multiple payments each month, a SoFi personal loan may be a good option.

Benefits of our personal loans include:

•  Fast, easy, and convenient online application process

•  Low interest rates

•  No origination fees required

•  No prepayment fees required

•  Fixed rate loan

You deserve peace of mind. And by taking out a personal loan to consolidate debt, the stress of juggling multiple credit card payments can be history. Ready for your fresh start?

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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College students are graduating with tens of thousands of dollars in student loan debt, which can make it difficult to make monthly student loan payments, let alone get by financially each month.

For those looking to get some help, the federal government offers some potential options, including income-driven repayment plans and the Public Service Loan Forgiveness program. Or refinancing your student loans can also help you potentially lower your interest rate or your monthly payment.

One option you may not be aware of is to apply for repayment program “grants.” These grants function similarly to scholarships in that you don’t have to pay them back, at least not monetarily. Instead, post-graduation, you’ll typically agree to work in a certain field for a set period in exchange for the help.

There are several student loan repayment programs that act like grants but don’t technically refer to themselves as such. You might consider them grants to pay off student loans, however, because they don’t require you to pay back the money plus interest.

Here are a few repayment programs to look into:

National Health Service Corps Loan Repayment Program

Qualifying health care providers can receive up to $50,000 if they agree to a two-year commitment to work in a Health Professional Shortage Area (HPSA).

You can apply if you’re a licensed primary care physician, nurse practitioner, certified nurse-midwife, physician assistant, dentist, dental hygienist, or a qualifying behavioral and mental health provider.

In addition, to be eligible for this grant you must have qualifying student loan debt and also be:

•  A U.S. citizen or national

•  As applicable, a provider or be eligible to be a provider in Medicare, Medicaid, or the State Children’s Health Insurance Program

•  Fully trained and licensed to practice

National Institute of Mental Health Loan Repayment Program

If you work or plan to work in biomedical, behavior, social, or clinical research, you may qualify for a grant to pay off student loans up to $35,000. You can apply the award to qualifying undergraduate, graduate, or medical school loans.

In return, you’d “agree to engage in at least two years of qualified research funded by a domestic nonprofit organization,” according to the National Institute of Mental Health .

NURSE Corps Loan Repayment Program

The Health Resources and Services Administration provides this program to registered nurses (RN), advanced practice registered nurses (APRN), and nurse faculty with nursing debt that meets the program’s qualifications. To qualify, you must also:

•  Commit to working at least two years in an eligible Critical Shortage Facility (CSF) in a high-need area or an accredited school for nursing

•  Have received your nursing education in an accredited school of nursing in the U.S.

If you qualify, you may receive up to 85% of unpaid nursing debt over three years—that’s 60% over the first two years with an option to extend to a third year for an additional 25%.

Indian Health Service Loan Repayment Program

This grant is for health professionals who agree to work in an American Indian or Alaska Native community for at least two years. In exchange, you can receive up to $40,000 in grants to help pay off student loans.

Recipients also have the option to extend their contract each year until their debt is completely paid.

Veterinary Medicine Loan Repayment Program

If you’re a veterinarian working in an area designated by the National Institute of Food and Agriculture as a “shortage area,” you may be eligible to receive up to $25,000 each year for a (minimum) three-year service commitment. The grant is reserved only for veterinary school student loan debt, however.

John R. Justice Student Loan Repayment Program

This program provides assistance to local, state and federal public defenders, and state prosecutors. To qualify, you would agree to work as a prosecutor or public defender for at least three years.

In return, you may be eligible to receive up to $10,000 in assistance per year up to a total of $60,000.

Department of Justice Attorney Student Loan Repayment Program

If you agree to a three-year service obligation with the Department of Justice as an attorney, you may be able to qualify for loan repayment assistance of up to $6,000 per year in matches based on your payments.

To be eligible, you must have at least $10,000 in qualifying federal student loan debt. The maximum amount you can possibly qualify for is $60,000 in total.

Armed Forces Repayment Programs

Each major branch of the military offers free grants to help enlisted service members pay off student loans. Here’s a high-level overview of some of the notable programs:

•  Army Student Loan Repayment Program (College Loan Repayment Program): If you meet specific qualifications and are active duty, Army Reserve, or Army National Guard Soldiers, you can get up to $65,000 of your student loans repaid by the Army.

•  National Guard Student Loan Repayment Program: If you enlist for a minimum of six years and satisfy other requirements , you can receive up to $50,000 in assistance.

•  Navy Student Loan Repayment Program: With a three-year commitment, you may be eligible to receive up to $65,000 in repayment assistance over that time.

•  Air Force JAG Student Loan Repayment Program: Once you’ve completed one year of service as a JAG officer , you may be eligible to receive up to $65,000 in grants to pay student loans over a three-year period.

State-Based Grants

Several states offer free grants to help pay student loans for borrowers who agree to live and work in the state, usually in a specific field. Here are some examples:

•  New York State Young Farmers Loan Forgiveness Incentive Program: Eligible college graduates pursuing a career in farming who agree to operate a farm in New York state for at least five years can receive up to $10,000 per year to help pay their student loans.

•  North Dakota Science, Technology, Engineering, and Mathematics (STEM) Student Loan Program: Qualifying college graduates who work in STEM-related fields in North Dakota may be eligible to receive up to $1,500 per year and up to $6,000 total student loan forgiveness.

•  Pennsylvania Primary Health Care Loan Repayment Program: If you’re a physician, dentist, or another practitioner who commits to two-years in an underserved area in Pennsylvania , you may be eligible to receive between $30,000 and $100,000 in student loan repayment assistance.

•  California Bachelor of Science in Nursing Loan Repayment Program: RNs living in California who agree to a one-year service commitment may receive up to $10,000 to help repay their student loans. They can also renew that commitment for up to two more years and receive up to $10,000 each year they qualify.

•  Maine Alfond Leaders Program: If you live in Maine and work in a STEM-designated job, you may qualify for repayment of up to half of your outstanding student loan debt, with a $60,000 maximum.

What to Do While You’re Waiting for Your Grant Money

If you qualify for a grant or student loan repayment based on your career or where you choose to work and live, the assistance can make a world of difference for your student loan repayment strategy.

But in the meantime, you’ll still have to make regular payments on your loans. One way to potentially get a lower payment or interest rate is student loan refinancing.

Depending on the terms you qualify for, you could significantly reduce the amount of money you pay in interest over the life of the loan. Or you could extend your loan term and potentially reduce your monthly payments, but that would mean you’d pay more in interest overall (longer term=more payments).

One thing to keep in mind, though: If you’re applying for grants that only apply to federal loans, you may want to hold off on refinancing, because you’ll lose your federal loan benefits when you refinance.

If you qualify to refinance with SoFi, there are no origination fees or prepayment penalties. You can even use our convenient student loan refinancing calculator to compare your current loan with a SoFi loan to get an idea of how refinancing could help you accelerate your student loan repayment.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

A lot of things keep us up at night. Finances. Dealing with family during the holidays. Finances. An awkward interaction with a coworker. Finances. An argument with a partner. Finances.

You get it.

Specifically, student loan interest rates could be causing your finance-related insomnia. But what is a high student loan interest rate, and how can you tell if yours is too high? To learn this, it’s important to understand the factors that influence interest rates in the first place.

What Are Interest Rates?

Without interest, lenders have no way of making a profit off of what you borrow. In their minds, everyone wins: you get the money you need, they eventually get their money back. And the interest yields earnings for the lender.

Interest rates can vary drastically depending on the type of loan, the lender, the amount you borrow, and often your credit history or financial profile.

Are Your Interest Rates Fixed or Variable?

Fixed interest rates are interest rates that don’t change over the life of the loan. Variable interest rates fluctuate based on market indexes . This means that the interest payment you pay one month might not be what you pay the next month. Sometimes, variable interest rates start out lower than their fixed interest rate counterparts.

The choice you make for your loan might depend on a number of factors. If you’re the type to feel more comfortable knowing you’re paying the same rate no matter what, a fixed interest rate might be the better option for you. If you’re willing to take a risk, a variable interest rate could be the way to go. But again, it’s a risk: your rate could increase based on how the market is doing.

You may want to check your loan terms to see which type of rate you have. If you have more than one student loan, make sure to review them all.

Federal vs Private Student Loan Interest Rates

Federal student loans come with fixed interest rates. And those interest rates are set by Congress. If you take out a federal student loan, the fixed interest rates will not change for the life of the loan. Interest rates for federal student loans are based on the 10-year treasury note and are set annually, and go into effect each July for the coming school year. (You can learn more about federal student loan interest rates here .)

While federal student loan interest rates are set by Congress, private student loan rates are set by each individual lender. Additionally, the rate you get is often determined by your creditworthiness. If you’re new to borrowing money, lenders might not see you as responsible with credit—because you haven’t proved you are yet. And if you’ve proven to be “bad” with credit in the past (aka having a lower credit score, for example), lenders may be less confident about loaning money to you.

For private student loans, there are a few things that determine your interest rate, like your credit score and credit history. Each lender has different credit standards to determine what is best for each borrower.

Student Loan Consolidation

If you’ve got federal student loans, you may be eligible to consolidate your student loans through the federal government with a Direct Consolidation Loan. Consolidating your student loans this way is essentially combining all of your loans into one with a new interest rate and term.

Your new interest rate under a Direct Consolidation Loan is the weighted average of your old loan rates, rounded up to the nearest one-eighth of 1%. Only federal student loans can be consolidated under a Direct Consolidation Loan.

Student Loan Refinancing

Student loan refinancing is similar to consolidation, but is handled differently. Refinancing is offered via private lenders, not the federal government. And instead of combining all your loans and averaging out the interest rate, you can get one new loan to replace all of your old ones, along with a new interest rate.

Your interest rate isn’t based on the interest rates of your former loans. Instead, it’s based on your current creditworthiness and other factors that vary by lender. For example, you may qualify for a lower interest rate when you refinance if you have a solid credit score and history, and can demonstrate you’re responsible enough to pay back your loan.

With SoFi, you can even refinance both federal and private student loans. If you have both, you might want to consider refinancing to see if you can lower your interest rate.

Income-Based Repayment

Income-Driven Repayment (IDR) plans are available to federal student loan borrowers who are looking to manage their payments. For an income-driven repayment plan, monthly payments are based off your discretionary income and the size of your family.

This can be helpful because if you’re not making as much as you’d expect while also financially supporting others, IDR plans help make payments more manageable, allowing you to continue making payments you might otherwise be missing.

Missing payments can cause you to become delinquent or eventually default on your student loans, which could crush your credit score.

There are different IDR plans to choose from. But if you’re still making payments after 20 or 25 years—depending on the plan —the remainder of your loan may be eligible for forgiveness. (Note: if you refinance your federal loans with a private lender, you will no longer be eligible for IDR plans and other federal student loan benefits.)

Getting a Cosigner

When you’re looking to refinance your loan, you may not have top-notch credit to land you an awesome interest rate. If that’s the case, you might want to explore cosigner options.

A cosigner can be anyone that agrees to pay your loan in your place if you fail to do so. Does this sound like a major responsibility and an even more significant ask? It is. Making a cosigner liable for you is a big deal. Failing to pay back your loan will still hurt your credit score. But with a cosigner, it will also hurt their credit score.

Whoever your cosigner is—a partner, a friend, a family member—having a plan in place to repay your new loan, including contingencies for potentially coming up short and needing immediate assistance, can provide reassurance to them.

You’ve graduated from college, degree in hand, and are headed into the workforce. After countless applications, phone screens, and in-person job interviews, you’ve done it—you’ve secured your first, full-time job as an adult.

As you experience the thrill of getting your first paycheck, it can be tempting to splurge on a celebratory dinner or a new outfit for work. But before you spend your paycheck on something indulgent, it could be worth thinking about how to spend it more wisely. Here are our best tips for spending your first paycheck as you start your new job.

Set Up Your 401(k)

You’ll learn pretty quickly that you’ll end up losing a decent chunk of change to taxes. One way to offset that is to invest money in tax-advantaged accounts, including a 401(k). As a part of your offer package, you will likely receive information on the company’s benefits—including any healthcare and 401(k) options. It can seem easy to brush this information off as you get started in your career, but reviewing it closely is an important part of deciding whether to accept a job in the first place.

A 401(k) is an employer-sponsored retirement plan that allows both you and, depending on your plan, your employer to contribute to the account. Employers may offer a contribution match of a certain percentage or specific amount. Each employer offers contribution matches at their discretion, so if you’re not sure what your company offers, check with HR or consult company policy.

It’s never too early to start saving for retirement. The earlier you begin making contributions, the more time you give yourself to take advantage of compounding. Basically, the interest you earn can then be reinvested, allowing your money to grow over time.

Consider investing at least enough to take advantage of your employer match. If your employer matches 6%, contribute 6%. That way you’re not leaving any money on the table. (Once you set it up, the money you contribute will probably be taken directly out of your paycheck.)

Set Up a Checking and Savings Account

Before you get your first paycheck, set up a checking and savings account. If you already have these types of accounts, now is a good time to assess whether they are still a good fit for your current financial needs. Take the time to review interest rates at various banks and online financial companies.

For example, SoFi Checking and Savings is a checking and savings account that earns you more and costs you nothing. You can easily access your money online or withdraw cash fee-free from 55,000+ ATMs worldwide.

Once you’ve set up your checking and savings accounts, consider setting up direct deposit. That way you don’t have to worry about depositing a check every time you get paid and you can start earning interest on that money as soon as it is payday.

You can also consider keeping your spending money in a checking account and setting up automatic transfers to your savings account. It’s an easy way to force yourself to save some cash at the beginning of your career.
An interest-bearing savings account is a great place to store your emergency fund. Conventional wisdom suggests saving anywhere from three to six months of living expenses to cover emergency expenses, such as unexpected medical bills or car repairs.

We know you just got started at your new job and may not be ready to think about these scenarios, but, in the event that you get laid off or the company goes out of business, having an emergency fund will allow you to stay afloat until you find your next gig. Even contributing $50 per paycheck to your emergency fund can help set you up with a little safety net should something unexpected happen.

Make Payments for Student Loans

Another important expense you should factor into your first paycheck is student loan payments. Even if you start your new job during your student loan grace period, you should probably consider your monthly payments and start setting the money aside. If you have unsubsidized loans, use the money to make interest-only payments on your loans.

If you have subsidized loans, it’s possible to save some, then use the money you have saved to make a lump-sum payment on the loans when your grace period ends. Both of these options can help set you off on the right foot when it comes to student loan repayment. By factoring your student loan payments into your budget upfront, you get used to not using that money for casual spending on things like dinner out or drinks with friends.

It’s also a good time to review your repayment plan on your student loans. If you have federal student loans there are a variety of repayment plans to choose from, including the standard 10-year repayment plan and four income-driven plans. If you have a combination of private student loans and federal student loans, you could consider refinancing them with a private lender, like SoFi, in the hopes of securing a lower interest rate.

With a lower interest rate you could potentially reduce the money you spend on interest over the life of the loan. This could be a great option if you are on a standard repayment plan and are interested in securing a lower interest rate.

If you’re taking advantage of federal programs like deferment, forbearance, income-driven repayment, or Public Service Loan Forgiveness, refinancing your student loans may not be for you, as you will no longer qualify for those programs.

To see how much refinancing could impact your loan, take a look at SoFi’s student loan refinance calculator. When you refinance with SoFi there are no prepayment penalties or origination fees.

Start an IRA

Even if you’re already contributing to a 401(k), setting up an IRA could be beneficial. There are two kinds of IRAs, traditional and Roth. When you contribute to a traditional IRA, the contributions are deducted from your taxes, meaning you’ll pay taxes on distributions when you retire.

When you contribute to a Roth IRA, your contributions are taxed upfront but can be withdrawn in retirement tax-free—and that includes any capital gains you’ve earned.

You can contribute up to $6,000 to either type of IRA annually. If you are over the age of 50, you can contribute an additional $1,000 as catch-up contributions.

An added benefit to opening a Roth IRA: You could use it to fund part of a down payment on the future purchase of a home. As long as the Roth IRA has been open for five years, you’re allowed to withdraw $10,000 from your Roth IRA to buy your first home without any taxes or penalties. This could be a good start for saving for retirement or for your first house.

Still Have Money Left? Treat Yourself

If after paying your monthly expenses and contributing to your various savings goals you still have money leftover, you can use it to splurge on something you’ll really enjoy like trying out a new restaurant, buying tickets to a concert or a sports game, or having a night out on the town.

Or, you could use the additional money to save up toward another short-term goal—maybe an international adventure, a TV, or a new bed frame. Or if you’re feeling frugal, use the extra money to make an additional payment on your student loans.

Paying more than the monthly minimum is one of the fastest ways to accelerate your student loan repayment. At the end of the day, you’re working to earn money to live your best life, so make sure you are enjoying it and saving for your long-term financial goals at the same time.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
SoFi Checking and Savings®
SoFi Checking and Savings is offered through SoFi Securities LLC, member FINRA / SIPC . Neither SoFi nor its affiliates are a bank.

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Whether you just got married or you’ve been with your spouse for years, you may be thinking about combining your finances.

Doing so can be challenging, especially if you both have different perspectives on managing money. But it can also help simplify your financial plan and potentially even help you save money.

With an average of $37,172 in student loan debt per borrower , it’s more important than ever to find ways to simplify and accelerate the debt repayment process. Refinancing student loans with a spouse could help you achieve both goals.

Consolidating Through the Department of Education

If you have federal student loans, you can consolidate your loans with a Direct Consolidation Loan .

If you do, the Department of Education will take the weighted average of the interest rates from all of your loans and round it up to the nearest one-eighth of a percent.

This means that consolidating your loans with the government may help simplify your loan repayment, replacing several monthly payments with just one.

Consolidating student loans with a spouse isn’t an option through the Direct Loan Consolidation program. You can only combine loans with your name on them, making it impossible to add your spouse.

Refinancing Your Student Loans

While the federal government won’t let you consolidate student loans with your spouse, a private student loan lender, like SoFi, will.

The process isn’t always straightforward, though. Typically, you would apply for a refinancing loan and add your spouse as a cosigner. Not only would this help you combine your finances, but it could also help you spend less money in interest on your new loan.

That’s because your interest rate is typically determined by your creditworthiness and income, and adding a cosigner with a strong credit history and solid income can help you secure a lower rate, even if your credit history is strong on its own.

To give you an idea of how much you can save on interest, let’s say your (not consolidated) federal student loan debt is $30,000 with a weighted average interest rate of 6%. (For the record, the 6% interest rate is a hypothetical based on a federal graduate and undergrad loans, which currently have fixed interest rates of 5.05% on the low end and 7.6% on the high end, depending on the loan.) On a 10-year Standard Repayment Plan , your monthly payment would be around $333, and you’d pay about $9,967 in interest over the life of your loans.

Now, let’s say you were to refinance your student loans with a private lender and qualified for a 5% fixed rate with your spouse as a cosigner. If you were to keep a 10-year repayment term, your monthly payment would be about $318, and you’d pay around $8,184 in interest.

That’s a savings of nearly $1,783 that you can use for other financial goals. To see how refinancing could impact your student loans, you can take a look at our easy-to-use student loan refinance calculator.

Considerations to Think About

Student loan debt and marriage may be a challenge, so it’s important to make sure refinancing student loans with your spouse is a good choice for your situation.

The primary consideration is that both you and your spouse as a cosigner would be legally responsible for paying off the debt. This means that if you experience financial hardship and miss payments or default, it could ruin both of your credit histories.

Some student loan refinance lenders offer a cosigner release program that allows you to remove a cosigner after a set number of consecutive, on-time payments.

Another thing to consider is that refinancing federal student loans will result in the loss of certain benefits the Department of Education provides. Specifically, private lenders typically don’t offer income-driven repayment plans. Also, you won’t be eligible for certain federal student loan programs, including Public Service Loan Forgiveness.

So as you consider the benefits of consolidating student loans with a spouse through refinancing, make sure you also include the drawbacks in your process.

Finding Out Your Potential Savings

Having student loans in a marriage can be challenging, but with open communication, you can stay on track.
If you’re even remotely considering refinancing your student loans with your spouse as a cosigner, check your rate offers to see if doing so can save you money. Whether or not you qualify for a lower interest rate, exploring the option may help make your decision easier.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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