Student-loan borrowers who combined their debt balances with a spouse are blocked from Biden’s one-time debt relief

College graduates.Robyn Beck/AFP via Getty Images

  • The law prohibits student loan borrowers with spousal loans from separating them into direct loans.

  • This prevents them from qualifying for Biden’s debt forgiveness of $10,000 to $20,000 for federal borrowers.

  • A bill was recently passed by the Senate that would allow these borrowers to separate their loans.

Millions of federal student loan borrowers will soon see up to $20,000 in debt balance reductions — but a small group who consolidated debt decades ago are out of luck.

In 2006, Congress shut down the Spouse Consolidation Joint Loan Program, which allowed married couples to combine their student debt balances with the idea that a single monthly payment with an interest rate would be more affordable.

But under current law, splitting these loans is prohibited, meaning that if a couple divorces — or even in the event of domestic violence — both borrowers must continue to repay the debt together.

This is especially prohibitive after President Joe Biden’s recent statement announcement up to $20,000 in student loan forgiveness for federal borrowers earning less than $125,000 per year. Only borrowers with loans held by the federal government are eligible for unique wide relief. While borrowers with some private federal loans — like those in the FFEL program — can consolidate their balance into direct student loans to access debt forgiveness, borrowers with spousal loans cannot separate their loans and are therefore blocked by Biden’s loan forgiveness.

A FAQs on debt relief published on pointed out that “FFEL Joint Consolidation Loans, often referred to as Spouse Consolidation Loans, are not eligible for consolidation in the Direct Lending Program under current law. “.

Federal borrowers will have until December 2023 to request Biden’s loan forgiveness via a form that will go live beginning of Octoberit is therefore up to Congress to pass a law by then that would allow the separation of these loans for the 776 borrowers who still have them.

Virginia Senator Mark Warner sponsored the Joint Consolidation Loan Separation Act of 2021, which would allow borrowers to separate their spousal loans. This past the Senate in June, and is now sitting in the House pending final passage. But not only does the wide window for canceling student loans weigh on these borrowers, those who are also government officials have even more time to separate their loans.

Last year, the Ministry of Education announcement reforms to the Public Service Loan Forgiveness Program (PSLF), which aims to write off student debt for government employees and non-profit organizations after ten years of qualifying payments. The reforms included a temporary waiver until October 31, 2022 that would allow all past payments to be counted towards forgiveness progression, including those previously deemed ineligible – but to be eligible, the type of loan must be a direct federal loan. Since joint borrowers cannot separate their loans to consolidate them, they cannot currently benefit from the PSLF exemption expiring in less than two months.

Insider before spoke to Russell Case, a borrower who consolidated his loans with his wife but was unaware that this would prevent him from receiving PSLF relief.

“I understand that people have to pay off their debt. I understand that part,” Case said. “But if the government promises debt forgiveness to civil servants after ten years and we find out afterwards that our loans are not eligible, that’s my biggest problem.”

Read the original article at Business Intern

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