Hooray! Congress Passes Bill To Help Thousands More Apply For Loan Forgiveness

Loan forgiveness eligibility is finally on the way for folks with consolidated spousal loans. Here’s what you need to know.

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A couple sits at a table and tabulates their student loans
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When the Biden Administration announced its student loan forgiveness package over the summer, it was met with acclaim almost across the board — for those who qualify for the program. Biden announced that owners of Federal Direct student loans 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, though, that were overlooked or otherwise not eligible for forgiveness. Now, one of those groups finally has a pathway to eligibility, and thousands of additional people will benefit from loan forgiveness: those with consolidated spousal loans.

That’s right. After months of the bill being stalled, Congress just passed a bill allowing those with consolidated spousal loans to essentially un-consolidate 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, enjoying a lower interest rate and one monthly payment. The program had one glaring oversight, though — there was no way to un-consolidate the loans, not even in cases of divorce or abuse.

Since private lenders backed the consolidated loans, the loans were ineligible for Biden’s loan forgiveness program and other forgiveness programs such as Public Service Loan Forgiveness. One statistic shared by Representative Shantel Brown suggests that at least 14,000 people are “liable for their spouse’s student loan debt,” suggesting that many thousands of Americans can now qualify to apply for debt forgiveness or other programs such as Public Service Loan Forgiveness (PSLF) once they separate their loans.

“They will be immediately able to apply for the severance of their loan,” bill co-sponsor Representative David Price told Insider about what will happen if Biden signs the bill. “If a couple wants to wants to sever the loans for whatever reason, maybe they want to take advantage of a lower interest rate, or maybe one of them is eligible for Public Service Loan Forgiveness, there may be various reasons that apply.”

And perhaps more importantly, the bill will allow people to disconnect financially from unresponsive, 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 signs off on it, is timely. The PSLF waiver program — part of an overhaul of the struggling PSLF system that allows payments previously not counted toward forgiveness to be made eligible, getting millions of people closer to the point where PSLF forgiveness is allowed — is set to expire on Oct. 31.

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

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

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