President Biden signs bill allowing divorced couples to break joint consolidation student loans
President Joe Biden on Tuesday signed an invoice allowing couples who combined their student loans when they were married to separate debt, opening the possibility for some of them borrowers get forgiveness of part of their debt.
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 a single payment. Through the program, the couples became legally responsible for each other’s debt.
But the terms of the joint loans prevented borrowers from breaking 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, Cancellation of civil service loans or payment programs that reduce monthly payments based on income.
“Congress stopped allowing married borrowers to consolidate all of their loans into joint consolidation loans more than 15 years ago, but did not provide a means for borrowers of these loans to undo the consolidation,” said Kyra Taylor, staff attorney for student loans at National Consumer Law. “As a result, borrowers with these types of obsolete loans either faced difficulty or were ineligible for new relief programs that were created in the years that followed, such as the forgiveness of civil service loans.”
Tuesday’s decision comes after Biden announced in August that he would forgive at least $10,000 in student loan debt for millions of borrowers, bringing much-needed relief to Americans struggling with payments. Biden, who made the decision using executive power, 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 vote of 232 to 193 – with 14 Republicans voting in favour. The bill was introduced by Sen. Mark R. Warner, D-Va., and Rep. David E. Price, DN.C.
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The law allows borrowers to split their loans based on the original 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 Department of Education, which requires both parties to approve the separation. But those who prove they have suffered domestic violence, economic abuse or have an unresponsive partner may apply.
“For too long, these spousal consolidation loans have financially locked spouses out, even in cases of domestic violence or divorce,” said Persis Yu, deputy executive director of the Student Borrower Protection Center.
More than 14,700 people combined their debts between 1993 and 2006, according to federal data reported by the Washington Post and obtained by the Center for the Protection of Student Borrowers. A recent NPR investigation found that around 14,000 borrowers are still handcuffed to each other 16 years later.
The bill also means borrowers can access student loan relief programs they previously couldn’t access, including the Civil Service Loan Forgiveness Program and income-tested repayment programs.
Contributors: Chris Quintana, Joey Garrison, Maureen Groppe, Ella Lee, Rebecca Morin, Ken Tran and Laura L. Davis
This article originally appeared on USA TODAY: Biden signs bill allowing ex-couples to break joint student loans