Under the bill, divorced couples will need to apply with the Department of Education to separate their student loans; Now they can qualify for Biden’s debt relief
On Tuesday, President Joe Biden signed a bill into law that allows divorced couples, who combined their student loans when they were married, to separate their debt. This initiative opens the door for individual borrowers to access the federal student loan forgiveness, recently established this year.
It may not be a familiar situation for most borrowers, but many newlyweds consolidated their debt, including student loans, to seek bundled loans with a lower interest rate and a single payment that eliminated both. debts. The problem: The terms of joint loans prevented borrowers from breaking their debts in divorce. This is the legal loophole that Biden’s bill attempts to fill.
In 2006, Congress eliminated a program that allowed married couples to consolidate their debt into joint loans. Legally, this program made couples jointly responsible for their spouse’s debt. However, despite legislative efforts to prevent debt consolidation, they did not establish a vehicle to unwind existing pooled loans.
Since then, the terms of joint loans made it impossible for borrowers to separate the debt from the marriages, even when cases of domestic violence, economic abuse, among other factors justified for divorce were exposed. The aggrieved spouses were to continue to bear the joint debt, regardless of the circumstances of the separation.
As if this were not enough, joint student loans were not eligible for federal government debt relief programs, such as public service loan forgiveness, repayment programs that reduced monthly payments based on income, or the recent $10,000 or $20,000 Biden student loan forgiveness.
These stories sensitized legislators, who drafted a bill to resolve these issues. In June, the Senate unanimously passed the Joint Consolidation Loan Separation Act with bipartisan support. The House passed the bill in September by a vote of 232-193, with 14 Republicans voting in favor. The bill was introduced by Sen. Mark R. Warner, D-Va., and Representative David E. Price, DN.C.
This law allows borrowers to split their loans based on the initial amount they each owe into two separate federal direct loans that will carry the same interest rates as the joint consolidation loan.
Borrowers must apply through the Department of Education, which requires both parties to approve the separation. But those who show evidence that they have experienced domestic violence, economic abuse or have an unresponsive partner can apply for themselves.
This measure comes at an appropriate time and complements the historic $10,000 or $20,000 in federal student loan forgiveness, depending on eligibility. By separating your joint loans, both ex-spouses may be eligible for loan forgiveness and other forgiveness and payment programs.
More than 14,700 people combined their debt between 1993 and 2006, according to federal data reported by The Washington Post and obtained by the Center for Student Borrower Protection. A recent NPR investigation found that around 14,000 borrowers are still handcuffed to each other 16 years later.