Divorced couples may qualify for student loan forgiveness. What to know for your debt
More borrowers might soon be eligible for student loan forgiveness.
Congress passed a bill Wednesday, Sept. 21, that would allow joint consolidation loans to be separated. The Joint Consolidation Loan Separation Act passed the Senate in June and now heads to President Joe Biden for approval.
The Biden administration has expressed its support of the bill and is expected to sign it into law.
If the bill is enacted, divorced couples will be able apply to have their jointly consolidated loan split into two separate loans, according to the White House. Jointly consolidated loans do not qualify for Biden’s student loan forgiveness plan, so splitting the loans would open up forgiveness to more people.
Here’s what you need to know if you hold a joint consolidation loan.
Joint consolidation loans
Until 2006, married couples could file for a joint consolidation loan, also known as a spousal consolidation loan, which made both people responsible for the collective debt, according to the Student Borrower Protection Center. Although Congress eliminated these types of loans in 2006, there was no way for borrowers to disentangle their loans even in instances of domestic or economic abuse or if their former partner was unresponsive.
The new legislation offers those borrowers a chance to finally separate their loans.
Under the Joint Consolidation Loan Separation Act, borrowers who previously received a spousal consolidated loan for their federal student loan debt can submit a joint application to the Department of Education to split the shared loan into two separate loans, the bill says.
Loans will be split proportionately as determined by the original loan sizes, according to the White House.
Individuals who have experienced domestic or economic abuse from the other borrower or those who are unable to reach their other borrower can still submit one application and qualify for separation, the bill says. In these cases, if a separate loan is granted to the borrower who applied, the other borrower becomes liable for the remainder of the consolidated loan.
Qualifying for loan forgiveness
Joint consolidation loans do not qualify for Biden’s student loan forgiveness plan. If loans are separated, they will become federal direct consolidation loans, the bill says.
Direct loans are eligible for Biden’s one-time student loan forgiveness, according to the Federal Student Aid office.
Borrowers who make less than $125,000 annually will see up to $10,000 of their debt canceled. Pell Grant recipients will see up to $20,000 in forgiveness. For households, the income requirement to qualify for forgiveness is less than $250,000 annually.
Applications for debt relief are expected to open in early October, but the Department of Education has yet to announce the date, a spokesperson told McClatchy News.
Borrowers will be able to apply for forgiveness through Dec. 31, 2023.
Even if you’ve paid off your student loans, you still might qualify for forgiveness
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