Consolidated joint student loans may soon be separated, eligible for forgiveness

When the Biden administration announced its student loan forgiveness program over the summer, it received acclaim from nearly every walk of life — for those who qualify for the program. Biden announced that direct federal student loan owners will be eligible for up to $10,000 in loan forgiveness and Pell Grant recipients will receive up to $20,000 in forgiveness, depending on their income. There were a few segments of the population, however, that were overlooked or otherwise ineligible for forgiveness. Now, one of those groups finally has a path to eligibility, and thousands more will get loan forgiveness: those with consolidated spousal loans.

It’s true. After months of blocking the bill, Congress just passed a bill allowing those with consolidated joint loans to deconsolidate and refinance their loans, making them eligible for federal loan forgiveness.

A popular program in the 1990s and early 2000s, spousal student loan consolidation allowed married couples to refinance and consolidate their loans, benefiting from a lower interest rate and one monthly payment. . The program had one glaring oversight, however – there was no way to unconsolidate loans, not even in the event of divorce or abuse.

Because private lenders backed the consolidated loans, the loans were ineligible for Biden’s loan forgiveness program and other forgiveness programs such as the civil service loan forgiveness. A statistic shared by Rep. Shantel Brown suggests that at least 14,000 people are “responsible for their spouse’s student loan debt,” suggesting that several thousand Americans are now eligible for debt forgiveness or other programs such as debt forgiveness. public service debt (PSLF) once they separated their loans.

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“They will be able to immediately ask to break their loan,” said the bill’s co-sponsor, Rep. David Price. Told Initiated on what will happen if Biden signs the bill. “If a couple wants to break the loans for whatever reason, maybe they want to take advantage of a lower interest rate, or maybe one of them is eligible for the cancellation of the loans. civil service loans, there can be various reasons that apply. »

And perhaps most importantly, the bill will allow people to financially disconnect from insensitive, abusive, or non-paying spouses or ex-spouses, providing the financial freedom to move on from bad relationships.

The passage of the bill, which will become law as soon as President Biden approves it, is timely. The PSLF waiver program – part of an overhaul of the struggling PSLF system that allows payments previously not counted for the rebate to be eligible, bringing millions of people closer to the point where the PSLF rebate is allowed – is due to expire on October 31.

“For too long, individuals have been tied to abusive or insensitive ex-partners through joint student loans,” Rep. Mark Warner, co-sponsor of the bill, said in a statement. “This legislation offers financial freedom to those who have spent decades unfairly held accountable for their former partner’s debt. I am thrilled to see the House of Representatives pass this legislation and look forward to bringing it to President Biden as soon as possible to begin providing relief to borrowers.

Details on how to apply for a loan split will be forthcoming, and Biden’s loan forgiveness application will be available in October.

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