Angela Powell married her college sweetheart – but since her divorce in 2014 the relationship has been tenuous. So when she learned that Congress was about to allow her to separate her student loans from hers, after years of carrying her debt as well as her own, she couldn’t contain her excitement.
“It’s almost unbelievable,” Powell says. “It’s going to change lives, and it’s going to change people’s outlook on hope, and especially mine.”
The bill in question, the Joint Consolidation Loan Separation Act, which President Biden is expected to sign this week, fills a loophole created in the 1990s when Congress began allowing married couples to consolidate their student loans at a rate of lower interest. It seemed like a good idea at the time – a way for couples to save money on their loans and have one monthly payment. Congress shut down the program in 2006, but never managed to separate the loans.
Sixteen years later, around 14,000 borrowers are still shackled to each other – even after divorce, according to an NPR survey. In some cases, borrowers are held responsible for a debt related to an abusive ex-spouse, forced to choose between paying a debt that is not theirs or emptying their credit while waiting for a solution.
Powell’s ex-spouse hasn’t made regular payments on their loans since 2016, despite holding almost double the amount of debt when consolidating, which left him with a monthly payment of 1,942 $.50.
Other borrowers, like Patrick Stebly, divorced out of court but had to create a court agreement to handle payments each month. He has been working for more than a decade to close the joint consolidation loophole.
“It’s been such a fight all these years,” Stebly said. He cried when he heard the news. “I’m thrilled about that, you know, finally, finally, finally fixed.”
The new legislation will allow borrowers with joint consolidation loans to split them proportionately based on their original loan amount.
Borrowers should contact the US Department of Education, which will require both parties to the loan to sign a form separating the debts. However, if a borrower can prove that he was a victim of domestic violence or economic exploitation by his ex-partner, or if he is unable to reach his ex-partner, he can initiate the separation himself.
For many, the Joint Consolidation Loan Separation Act will also pave the way for their loans to be forgiven under the federal government’s Public Service Loan Forgiveness (PSLF) program.
Bill passed with bipartisan support
The legislation was championed by Sen. Mark Warner, D-Va., and House Rep. David Price, DN.C. Although introduced by Democrats, the bill passed unanimously in the Senate and with bipartisan support in the House – where 14 Republicans broke ranks to help push the measure through.
When the bill passed, lawyers and borrowers cheered from the upstairs balcony of the house, including Chris Alldredge, who consolidated his loans with those of his wife in 2005. At the time, the couple were unaware that the consolidation disqualified them from the PSLF, which promises debt relief to federal borrowers who spend 10 years in a public service job, such as teaching or fighting fires.
They have been working for years to separate their debts.
“I watched that hammer lift and I knew in that exact moment that everything that had happened over the past 16 years and everything our group had worked feverishly over the past eight months or so was finally coming to an end. come to a climax,” Alldredge said.
Alldredge and his wife help run a Facebook group with more than 700 members who have shared their joint loan consolidation stories with lawmakers. Their representative, Trey Hollingsworth, was one of the Republicans who walked down the aisle and signed the bill.
New law expected to pave way for civil service loans to be canceled
Cynthia Malone is a licensed clinical social worker with the Office of the Public Defender in Columbia, Missouri. She is married to a probation officer and between them they worked decades in the civil service.
Like Alldredge, when Malone and her husband consolidated their student loans for a better interest rate, little did they know they were losing the ability to get their debt forgiven through PSLF.
Malone says the hardest part of their situation is watching co-workers with the same experience — but not spousal consolidation — have their debts forgiven.
“We just resigned ourselves to paying,” she says. “While many of our colleagues were relieved by the PSLF.”
She felt left behind because of a choice they made long ago at the request of their loan officer.
Today, Malone and her husband still have a total of $110,000 in student loans. She is optimistic that the new legislation will allow them to have their loans canceled through the PSLF.
“I’m thrilled! Just over the moon. I’m so, so, so happy,” she said.
But, unfortunately, experts are less optimistic. This is because PSLF comes with its own complications. The struggling program has been plagued by mismanagement, and last year the Biden administration created a temporary waiver to make it easier for borrowers to qualify. This waiver expires at the end of October, giving borrowers who will benefit from the Joint Consolidation Loan Separation Act little time to separate their consolidated debts, then convert their loans to direct federal student loans, and then apply for the PSLF waiver.
Abby Shafroth, director of the Student Loan Borrower Relief Project, has worked with borrowers trying to claim the PSLF under the current waiver. She says she is worried about the timing of this new legislation.
“My biggest concern is whether [the Education Department] will even have a process in place for borrowers to split their loans before the October 31 deadline,” she says.
At the time of publication, the Education Department had no response to repeated requests from NPR about whether this group of borrowers will be processed in time to apply for the PSLF waiver.
Bryce McKibben, senior director of the Hope Center for College, Community, and Justice, says these borrowers are stuck in a sort of “purgatory” while they wait for the Department of Education to figure out next steps — which may take some time. .
“I guess this process takes at least a month or two from the time they make an app available.”
McKibben says that due to the timing of the legislation, the department may choose to make a special extension for these borrowers or establish a single-track application from separation to the PSLF review.
“It would be a policy change that I think would be entirely within [the Education Department’s] discretion,” McKibben says. “All of these timelines here are all arbitrary anyway.”
The Department of Education also quietly changed its website on Thursday to exclude certain private loans from its one-time debt relief program. It is unclear whether joint consolidation loans fall into this category.
In a statement to NPR, the department said it will “continue to explore other legally available options to provide relief” to excluded borrowers.
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