Student loan separation may be imminent for some borrowers
It’s hard to imagine, but it’s a reality in Virginia. Did you know that if someone was previously married to a domestic abuser, they could still be legally obligated to pay that person’s student loan debt, even after getting divorced? With the recent Senate stint of US Senator Mark Warner’s (D-VA) co-sponsor Joint Consolidation Loans Separation Actvictims take one step closer to financial freedom.
For simplicity, here is a timeline of the major changes that led to the current Senate passage:
- 1993: A federal law has been passed allowing married couples to combine their student loan debt and be jointly and severally liable for repayment.
- 2006: Married couples were no longer able to consolidate their student loans, but those already locked into the ‘deal’ were unable to separate their accounts
- 2017: Warner authored the original version of the deed following a voter expressing her struggles with a joint consolidation loan
- 2021: Warner co-sponsored the Joint Consolidation Loans Separation Act 2021 to separate the financial responsibility for the student loan of an abusive ex-spouse from the victim
- 2022: The US Senate passed the law, effectively sending the bill to the House of Representatives
According to Warner, who spoke with the US Department of Education before the Banking Committee hearing as of May 5, there were more than 14,000 joint consolidation student loans outstanding totaling approximately $800 million.
During the hearing, Mike Pierce, executive director of the Student Borrower Protection Center, said that under the current scope of the law, a person can receive financial responsibility for the loan originally intended for joint repayment.
“Your bill would help dissolve these loans, but not just to help provide a fairer outcome for borrowers, but to restore access to key elements of the student loan safety net that are being denied to borrowers who have these so -so-called spousal consolidation loans, including access to forgiveness of utility loans and the ability to get reimbursement based on income that actually matches their financial situation,” Pierce said in response to Warner. during the budget hearing. “Right now the student loan safety net is failing people with these so-called spousal consolidation loans and your legislation would fix this mess.”
Although the focus is often on couples divorced due to domestic violence, the law doesn’t stop there – it would also give former couples the opportunity to break the loan in case of economic abuse or insensitivity of a former partner, for example.
Here’s how it helps
If passed by the House and signed by President Joe Biden, the legislation would amend the Higher Education Act of 1965, allowing borrowers to separate joint consolidation loans. According to Warner’s office, the change would:
- Borrowers must submit an application to the Department of Education to split the Joint Consolidation Loan into two separate Federal Direct Loans
- The remainder of the loan should be divided proportionately with the repayment based on the percentages each borrower originally contributed to the loan
- The two new federal direct loans will have the same interest rates as the joint consolidation loan
- Borrowers will have the option to transfer qualifying payments to income-driven repayment programs and the Civil Service Loan Forgiveness Program
“The Senate’s passage of this common sense law is a great step forward for victims of domestic violence and financial abuse who have spent decades fighting for their financial freedom. By finally allowing individuals to break their joint consolidation loans, this bill will provide much-needed respite to vulnerable individuals who are unfairly held responsible for a former partner’s debt,” Warner said in a statement on the law. “I urge my colleagues in the House to act urgently and send this bill to the President’s office as soon as possible.”
Warner’s office further noted that the law had received support from a number of organizations, including the National Network to End Domestic Violence, National Consumer Law Center, North Carolina Coalition Against Domestic Violenceand the Virginia Sexual and Domestic Violence Action Alliance.
You can read more about the Joint Consolidation Loan Separation Act in a Dogwood article published last year when the legislation entered the Senate.