Borrowers will no longer be trapped in joint student loans

President Biden signs the “Joint Consolidation Loan Separation Act” to help people to separate their payments.
pslf(DC Bureau)
Published: Oct. 12, 2022 at 3:16 PM CDT
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WASHINGTON (Gray DC) - Imagine being trapped in a financial contract with your ex-spouse or even an abusive partner. A bipartisan measure President Joe Biden signed late Tuesday seeks to fix that long-standing issue when it comes to joint student loans.

The “Joint Consolidation Loan Separation Act” allows borrowers who previously jointly consolidated their student loans to separate their payments. Until now, Congress had not provided a means to severe existing loans although the consolidation program was eliminated on July 1, 2006.

“This will help families who’ve been in abusive relationships, with deadbeat ex-spouses, with folks who would have otherwise qualify for student debt forgiveness because they’re teachers or firefighters or other public service jobs,” said Senator Mark Warner (D-Va.) who authored the original version of the bill in 2017.

“We first heard about this in 2015, when Sara who lives in McLean, had been living in Texas, got divorced from her husband, came up here. Single mom raising two kids, public school teacher. But because she’d entered into a joint consolidation with her husband, she had to still pay her husband’s student debt even though they’ve been divorced for years. So, the good news is this bill will fix that and for literally about 13,000 other Americans all over the country. Crazy it took seven years to get it done. But finally, the president signed the bill,” said Warner.

Senators Marco Rubio (R-Fla.), John Cornyn (R-Texas), and Tina Smith (D-Minn.) also supported the measure along with Representatives David Price (D-N.C.) and Haley Stevens (D-Mich.).

“We had to convince senator after senator there was no hidden agenda here. This has nothing to do with ideology. This was just plain common sense,” said Warner.

Borrowers will be able to submit an application to the U.S. Department of Education to split their consolidated loan into two separate federal direct loans. The remainder of the loan (the unpaid portion and the accrued unpaid interest) would then be split proportionally based on the percentages that each borrower originally brought into the loan. The newly split loans will have the same interest rates as the joint consolidated loan.

Virginia educator Katie Lockhart and her ex-husband, who were married for 13 years, are among the people who the new law will benefit. The former couple has been stuck paying their joint student loan together despite being divorced since 2018.

“You know, my ex-husband and I were both graduating from school. We were building a house. We were starting our careers. So, it made sense to have one payment instead of two separate ones. You know, I didn’t realize what that impact would be,” said Lockhart who added, “of course, at that point in time you never think about divorce, you know, and you know, and we still were married for a good number of years after that. So it wasn’t an issue. We divorced in 2018. And at that point, when we tried to separate things out, that’s when we realized that we were locked in.”

Lockhart considers herself lucky because her and her ex-husband get along so they have both been paying their fair share of the joint loan.

“You know, going through a breakup of a marriage is very tough on all parties involved. And you could easily see how one person could try to hurt the other and financially ruin one another,” she said. “So we are very fortunate that neither one of us let the anger take over because that could have easily been what happened by not being able to separate that out at all.”

Lockhart and her ex-husband, who share three children together, have also taken a financial hit due to the joint student loan. They both work in education which would allow them to apply for debt relief. But because of their joint consolidation, they have not been able to qualify.

“We’re both starting our 19th year... at the time we consolidated was when we were starting our careers in education. So, because of that we both would qualify for the public service loan forgiveness. And actually, my ex-husband worked in a school that would have qualified for a teach grant long before PSLF (public service loan forgiveness) came out. And, we were rejected for that,” she said.

Lockhart said she has worked to prepare her students to avoid the issues she has faced, as she has guided them through the college loan process as a high school counselor. Meanwhile, she plans to file for that student debt relief again now that the President has signed the “Joint Consolidation Loan Separation Act” into law.

“One of our sons actually has Down’s syndrome, so planning for our children’s future remains a little bit of a different thing for us. We’re planning for two of our boys to become independent and, you know, go off to college, that sort of thing... We wanted to begin saving for their college education, but we really had to scale back. We did. We do. It’s just not to the extent that we really could and really should be at this point in our lives,” she said. Lockhart added, “that’s where we should be able to be saving is to prepare for their futures so that they don’t have to take out loans.”

The deadline this year to file for the waiver for public service student loan forgiveness is October 31st.

Sign ups will also begin for the President’s pandemic student loan forgiveness extension in October. Currently, student loan payments are frozen until December 31st. The Biden administration reminds everyone to check to see what relief they may qualify for.