House Clears Fix to Joint Consolidation Loan Program

By Hugh T. Ferguson, NASFAA Senior Staff Reporter

The House on Wednesday cleared the Joint Consolidation Loan Separation Act that would allow for joint consolidation loans to be split into two Direct Loans and enable borrowers to become eligible for certain student debt relief programs.

Specifically, the legislation would permit borrowers who previously consolidated their student loan debt with a spouse to submit an application to the Department of Education (ED) to split their loan into two separate federal Direct Loans, split proportionally based on the percentages that each borrower originally brought into the loan.

While Congress eliminated the spousal consolidation program in 2006, lawmakers did not offer a way to disband existing loans, which has caused some borrowers who were subject to domestic abuse or divorce to remain financially tied to the joint debt. The bill requires the individual borrowers to jointly apply for separation of their consolidation loan, with exceptions for cases of domestic violence, economic abuse, inability to reach one borrower or the borrower’s loan information, or other circumstances as prescribed by ED.

“Borrowers who entered into a joint consolidation loan should have the right to separate the loan if their circumstances or wishes have changed,” said NASFAA Vice President of Public Policy and Federal Relations Karen McCarthy. “The Joint Consolidation Loan Separation Act corrects this long-standing oversight in the law.”

This change would enable borrowers to access debt relief through the Public Service Loan Forgiveness (PSLF) program as a part of the limited waiver period, which is slated to expire at the end of October, as well as income-driven repayment plans.

Back in June the Senate, with little fanfare, passed the bill by unanimous consent. Wednesday’s House vote was advanced by a vote of 232-193 with the vast majority of Republicans rejecting the legislation.

House Republicans took issue with what they said was the bill’s “flawed design,” and that while they supported the intent of the legislation they could not vote to support the finalized language.

“Under the Senate-passed language, when a borrower files for a new consolidated loan, he or she could potentially leave his or her spouse with the remaining balance. We must be cognizant of the fact that a borrower could use this new legislation as a weapon,” said Rep. Virginia Foxx (R-N.C.), ranking member of the House Education and Labor committee. “This is why we need safeguards in place to ensure that both parties are not subject to potential abuse through the separation process and not just the one filing for a new consolidation.”

Republicans also argued that ED’s estimated 12- to 18-month-long implementation process was unacceptable and far too lengthy of a timeline for the changes outlined in the bill.  The House GOP opposition also stemmed from concerns, reported by POLITICO, that these borrowers could be made eligible for loan cancellation under the debt relief program that the administration announced in August.

The measure now heads to President Joe Biden’s desk for his expected signature.


Publication Date: 9/22/2022

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