President Joe Biden on Tuesday signed a bill allowing couples who combined their student loans when they were married to separate the debt, opening up the possibility for some of these borrowers to have part of their debt forgiven.
In 2006, Congress eliminated a program that allowed married couples to merge their student debt into a joint loan in exchange for a lower interest rate and single payment. Through the program, couples became legally responsible for each other’s debt.
But the terms of the joint loans prevented borrowers from severing their debts — even in cases of domestic violence, economic abuse, or divorce — and excluded them from access to debt relief, such as Biden’s student loan forgiveness plan, Public Service Loan Forgiveness or payment programs that lower monthly payments based on income.
“Congress stopped allowing married borrowers to consolidate all of their loans into joint consolidation loans over 15 years ago but did not provide a vehicle for borrowers with those loans to undo the consolidation,” said Kyra Taylor, student loan staff attorney at the National Consumer Law Center. “As a result, borrowers with these obsolete loan types faced difficulty or were ineligible for new relief programs that were created in the years since, like Public Service Loan Forgiveness.”
Tuesday’s move comes after Biden announced in August that he would cancel at least $10,000 in student loan debt for millions of borrowers, giving long-sought relief to Americans saddled by payments. Biden, who made the move using executive authority, also said the cost of a college education has become exorbitant.
In June, the Senate unanimously approved the Joint Consolidation Loan Separation Act with bipartisan support. The House passed the bill in September with a 232-193 vote — with 14 Republicans voting in favor. The bill was introduced by Sen. Mark R. Warner, D-Va., and Rep. David E. Price, D-N.C.
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The act allows borrowers to split their loans based on the initial amount each owed into two separate federal direct loans that will have the same interest rates as the joint consolidation loan.
Borrowers must apply through the Education Department, 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, are able to apply themselves.
“For far too long, these Spousal Consolidation Loans have locked spouses together financially even in the case of domestic abuse or divorce,” said Persis Yu, executive director of the Student Borrower Protection Center.
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 Student Borrower Protection Center. A recent NPR investigation found that about 14,000 borrowers are still handcuffed to each other 16 years later.
The bill also means borrowers can access student loan relief programs they couldn’t before including the Public Service Loan Forgiveness Program and income-driven repayment programs.
Contributing: Chris Quintana, Joey Garrison, Maureen Groppe, Ella Lee, Rebecca Morin, Ken Tran, and Laura L. Davis