Student borrowers get a rare victory as the Senate approves a fix

The Senate has approved a proposal that would allow borrowers struggling with student loan debt related to a spouse or ex-spouse to separate those loans. For many, it could also pave the way for their loans to be terminated under a federal loan forgiveness program.

If approved by the House and signed by President Biden, the legislation would close a loophole created in the 1990s that allowed married couples to consolidate their student loans at a lower interest rate. Congress shut down the program in 2006, but never got around to separating the loans.

Nearly two decades later, borrowers are still chained to each other, even through divorce. And in some cases, borrowers are responsible for a debt related to an abusive former spouse.

An added benefit for some borrowers is that they can now become eligible for the Federal Civil Service Loan Forgiveness Program. The program allows long-serving civil servants such as teachers and firefighters who qualify to have their loans forgiven.

The Joint Consolidation Loan Separation Bill approved by the Senate on Wednesday would allow borrowers affected by spousal consolidation to separate their loans based on the original percentage they contributed.

“Now, if you contributed 70% of the student debt, you will be liable for 70%,” says Sen. Mark Warner, a Virginia Democrat who is a co-sponsor of the legislation. “Thousands of people were stuck with obligations, sometimes from a domestic abuser, it can be tens of thousands of dollars.”

For borrowers like Angela Powell, who lives near Dallas, going through the Senate is one step closer to freeing her ex-husband from debt. She says he hasn’t made regular debt repayments since 2016 and the burden of double loans has thrown her into forbearance and troubled financial situations.

The prospect of getting off a loan and finally closing this chapter of his life has Powell beaming: “I feel like I can lose some of my weight now. Thank you, Jesus!”

“A bit of hope crept in,” says Cynthia Malone, a licensed clinical social worker in Columbia, Missouri. “There’s a bit more bounce in my step today.”

Malone, like some of those borrowers, hopes this bill will be the solution she needs to get her loans forgiven. In their current form, these consolidated loans are not eligible for public service loan forgiveness, but if the House and President Biden sign off soon, some borrowers can separate their debts and apply for forgiveness.

The current PSLF waiver expires in October, so time is running out.

Representative David E. Price, the North Carolina Democrat who sponsored the bill in the House, looks forward to the next step: “We are optimistic that a bill that has passed the Senate at the unanimity will be taken up by the Chamber.”

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