Should I Cosign for My Spouse Refinancing a Student Loan?

Deciding to refinance student loans as a married couple could be a smart move to improve finances, especially if one spouse has much better credit.

A student loan refinance may result in a lower interest rate, which saves money over the life of the loan. This could help alleviate financial stress and allow you to reach other financial goals, such as buying a home, saving for vacations, and building retirement savings. But when your spouse is refinancing, should you cosign?

There isn’t a clear-cut answer. Consider the pros and cons of cosigning and decide whether it’s right for you and your relationship.

Keep in mind that refinancing federal student loans into private loans means losing benefits that only federal loans offer, including potential loan forgiveness, income-driven repayment plans, generous deferment and forbearance options, and discharge for death or disability.

What are the benefits of cosigning for a spouse?

Adding a creditworthy cosigner to a refinance loan can improve approval odds, lower the interest rate, and even strengthen your marriage by tackling debt as a team.

Increase chances of approval

Having a cosigner with a better credit history will increase the likelihood of getting approved. Generally, lenders want to see a cosigner with a low debt-to-income ratio, steady income, a history of on-time monthly payments, and a good credit score (at least 620).

If you are stronger than your spouse in any of these areas, cosigning can help the primary borrower qualify.

Possibility for better interest rates

Your new interest rate is generally determined by the income and credit of both the borrower and cosigner. (Earnest also evaluates earning potential, education, and savings.) This means including your income could help your spouse get a better rate.

Having a cosigner also reduces the lender’s risk, making approval more likely. With lower interest rates, the loan will cost less over time.

Working toward a joint goal

Sadly, student loans are causing marriage problems, with one in eight divorces citing student loan debt as a factor. Choosing to refinance your student loans together and helping your spouse with repayment can potentially strengthen your relationship.

Communicate and create a game plan together for tackling the debt.

Could improve your credit

While mismanaging debt repayment can result in negative consequences, responsibly repaying the loan could actually improve your credit. Your payment history makes up 35% of your FICO score, so making on-time payments every month can raise your score over time.

Cosigner release may be available

Many student loan refinancing lenders offer cosigner release. After a specified period of on-time payments, the primary borrower may apply to release their cosigner from the loan. When this happens, you would no longer be legally tied to the debt.

What are the risks of cosigning for a spouse?

Before you cosign, understand the potential downsides, including impacts to your credit, future borrowing ability, and ongoing responsibility even if the marriage ends.

Could impact future financial purchases

While on-time payments can help improve your credit score, there will also be negative implications from taking on new debt. Adding this loan will increase your debt-to-income ratio, which could make it more challenging to get approved for a mortgage or car loan. Consider whether it would be better for just one partner to carry the debt so the other’s credit remains unaffected.

Equal responsibility, even in divorce

Once you cosign a private student loan, including during refinancing, you are just as responsible for repaying it. You remain equally responsible for on-time payments even if you get divorced, and even if there is a prenuptial agreement stating otherwise.

Missed payments hurt both credit scores

If you’re having financial difficulties and end up missing a payment or going into default, this will impact both your credit score and your spouse’s. One late payment can stay on your credit report for up to seven years.

What should you consider before cosigning?

Before agreeing to cosign, ask yourselves these questions:

• What are the loan terms? Review the interest rate, repayment period, and monthly payment to make sure they fit your budget.
• Does the lender offer cosigner release? If so, find out how many on-time payments are required and whether the primary borrower will likely qualify.
• How will this affect your debt-to-income ratio? If you’re planning to buy a home or car soon, cosigning could complicate the application process.
• What happens if you divorce? Understand that you’ll remain responsible for the loan regardless of your marital status.
• Is your spouse’s credit likely to improve? If they can refinance on their own in a few years, you may not need to cosign now.

If you’re considering refinancing, review the requirements for student loan refinancing and learn how to choose a lender.

Bottom Line

Cosigning your spouse’s student loan refinance is a personal decision that depends on your financial situation, future goals, and comfort with shared responsibility. If you have stronger credit and want to help your spouse secure lower interest rates, cosigning can be a valuable tool. Just make sure you understand the risks, and have a repayment plan that works for both of you.

Frequently Asked Questions