WASHINGTON [9.22.22] – U.S. Sen. Tina Smith (D-MN) announced that legislation she co-led to provide relief to individuals with consolidated loan debt with a spouse – including victims of domestic violence and financial abuse – has passed the House of Representatives and will be signed into law by President Biden. The bipartisan, bicameral bill will allow individuals to sever joint consolidation loans with a former spouse, which will provide long overdue financial freedom for vulnerable individuals who are being unfairly held responsible for the debt of a former partner.
“It’s not fair for Minnesotans to be left on the hook for the students loans of a former spouse. Survivors of domestic violence and financial abuse should not be tied to their abuser by student loans,” said Sen. Smith. “Sixteen years ago Congress ended a misguided loan program, but it did nothing to allow those who already had these loans a fair and appropriate way to cut ties. This bill will allow individuals to sever their joint consolidation loans that links them to a former partner – an especially important step for victims of domestic abuse. I am thrilled to announce the passage of this common sense bipartisan legislation and look forward to seeing it signed into law by President Biden.”
While Congress eliminated the program to allow spouses to consolidate their loans in 2006, it did not provide a mechanism for severing existing loans, leaving thousands of people forced to pay the students loans of their former partners. These loans also locked married couples out of federal programs to provide loan forgiveness for teachers, firefighters, and other public servants.
Currently, there is no way to sever jointly consolidated loans, even in the event of domestic violence, economic abuse, or an unresponsive partner. As a result, some borrowers remain liable for their abusive or uncommunicative spouse’s portion of their consolidated debts. This legislation provides relief to these individuals by allowing borrowers to split this debt.
The Joint Consolidation Loan Separation Act would allow borrowers to submit an application to the Department of Education to split the joint consolidation loan into two separate federal direct loans. The joint consolidation loan remainder – the unpaid loan and accrued unpaid interest – would be split proportionally based on the percentages that each borrower originally brought into the loan. The two new federal direct loans would have the same interest rates as the joint consolidation loan.
Additionally, the bill would enable borrowers to access student loan relief programs, such as the Public Service Loan Forgiveness (PSLF) Program and income-driven repayment programs for which they were previously ineligible due to their joint consolidation loans.
The Joint Consolidation Loan Separation Act has been supported by a number of organizations, including the National Network to End Domestic Violence, National Consumer Law Center, North Carolina Coalition against Domestic Violence, and the Virginia Sexual and Domestic Violence Action Alliance.