Consolidate loanspouse student
There are many types of benefits obtained through student loan consolidation. For example, a person can easily lower the monthly payments and can invest the amount saved anywhere. Similarly, student loan consolidation results in lowering of interest rates too. It also allows a person in repaying loan amount in comparatively longer periods. In United States, student loan consolidation is done for federal student loans as well as private student loans. Federal student loans include Stafford loans, plus loans, Perkins loans etc. Both, students and parents can go for student loan consolidation.
As far as spouse is concerned, with effect from 1st July, 2006, married students cannot consolidate their student loans together. This decision was taken because of difficulties faced after the consolidation of loans. This is because when married couples consolidated their student loans, each of spouses became responsible and liable for the full loan amount. In case of divorce, it was not possible to separate the student loans and their outstanding and great difficulties were faced in many cases.
To avoid complexities and confusions involved in the process, it was decided not to allow married couples in consolidating their loans together. This decision was taken by the Congress as a part of Higher Education Reconciliation Act, 2005. Before enactment of this act, married couples were allowed to consolidate their education loans even during the grace period. Most of couples went for consolidation of student loans after they had entered the repayment period.
There are many benefits obtained by couples through student loan consolidation before 1st July 2006. For example, couples were able to qualify for longer repayment periods and were able to get lower monthly payments. Many couples saved thousands of dollars over entire consolidated period and repaid their loans successfully. Cases, where couples went for filing divorces, splitting of loans was not possible during the divorce proceedings and each of spouses held responsible for the repayment of outstanding loan amount. Thus, if one spouse was not able to make monthly payment, other spouse became responsible automatically. There was one more difficult faced by many couples. Due to non repayment of monthly installment by one spouse, since other spouse became responsible, his or her credit record or rating was also affected adversely.
Other important aspect attached with spousal student loan consolidation was that it was not eligible for in-school deferment. This is because for qualifying for the deferment, it was required that both the spouses were enrolled in the college. In cases, where one spouse died or became disabled permanently, corresponding portion of debt was forgiven.
Many experts felt that spousal student loan consolidation was not a good idea at all. This is because if any spouses passed away and there was no spousal consolidation, estate of deceased spouse is not responsible for paying back the sum. However, if student loans pertaining to spouse have also been consolidated, upon the death of spouse, estate of other spouse is responsible for the repayment of remaining loan amount.
With ending of above type of loan, divorcing spouses would not face any difficulties regarding student consolidation loans.
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