Student loan separation may be just around the corner for some borrowers

It’s hard to imagine, but it’s a reality in Virginia. Did you know that if a person was previously married to a domestic abuser, they could still be legally responsible to pay for that person’s student loan debt — even after getting a divorce? With the recent Senate passage of co-sponsor US Sen. Mark Warner’s (D-VA) Joint Consolidation Loan Separation Act, victims are one step closer to financial freedom.

To streamline, here’s a timeline of major changing points that led up to the present-day Senate passage:

• 1993: A federal law passed allowing married couples to combine their student loan debt and be jointly liable for the 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 act following a constituent expressing her struggles with a joint consolidation loan
• 2021: Warner co-sponsored the Joint Consolidation Loan Separation Act of 2021 to sever the financial responsibility of an abusive ex-spouse’s student loan from the victim 
• 2022: The US Senate passed the act, effectively sending the bill to the House of Representatives

According to Warner who spoke with the US Department of Education prior to the Banking Committee hearing on May 5, there were more than 14,000 outstanding joint consolidation student loans totaling approximately $800 million.

At the hearing, Mike Pierce, executive director of the Student Borrower Protection Center, expressed that under the current scope of the law, one person may receive the 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 actually restore access to key parts of the student loan safety net that are denied to borrowers that have these so-called spousal consolidation loans, including access to public service loan forgiveness and the ability to get an income-driven repayment that actually matches their financial circumstances,” Pierce said in response to Warner at 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.” 

While emphasis often revolves around couples divorced due to domestic abuse, the act doesn’t end there — it would also give former couples the opportunity to sever the loan in cases of economic abuse or unresponsiveness from a former partner, for example.

Here’s How It Helps

If passed by the House and signed by President Joe Biden, the act would amend the Higher Education Act of 1965, authorizing borrowers to separate joint consolidation loans. According to Warner’s office, the change 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 remainder of the loan to be split proportionally with the repayment based on the percentages that each borrower originally brought into the loan
• The two new federal direct loans to have the same interest rates as the joint consolidation loan
• Borrowers to have the opportunity to transfer eligible payments toward income-driven repayment programs and the Public Service Loan Forgiveness program

“The Senate passage of this commonsense legislation is a huge step for survivors of domestic violence and financial abuse who have spent decades fighting for their financial freedom. By finally allowing individuals to sever their joint consolidation loans, this bill will provide needed respite to vulnerable individuals who are being unfairly held responsible for the debt of a former partner,” Warner said in a statement about the act. “I urge my House colleagues to act with urgency and send this bill to the President’s desk as soon as possible.”

Warner’s office further noted that the act received support from 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.
You can read more about the Joint Consolidation Loan Separation Act in an article Dogwood published last year when the legislation entered the Senate.