The Senate has approved a proposal that would allow borrowers stuck with student loan debt linked to a spouse or ex-spouse to separate those loans. For many, it could also open a path to having their loans erased as part of 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 for a lower interest rate. Congress shuttered the program in 2006, but never passed a way to separate the loans.
Almost two decades later borrowers are still shackled to each other – even in cases of divorce. And in some cases, borrowers are responsible for debt that was linked with a former abusive spouse.
An extra benefit for some borrowers is that they may now become eligible for the federal Public Service Loan Forgiveness program. The program allows long-time civil servants such as teachers and firefighters who qualify to have their loans forgiven.
The proposed Joint Consolidation Loan Separation Act approved by the Senate on Wednesday would allow borrowers affected by spousal consolidation to separate their loans based on the initial percentage they brought in.
"Now, if you contributed 70% of the student debt, you will be responsible for 70%,'' says Senator 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, that could amount to tens of thousands of dollars."
For borrowers like Angela Powell, who lives near Dallas, passage by the Senate is a step closer to freedom from her ex-husband's debt. She says he has not made regular payments to the debt since 2016, and the burden of double loans launched her into forbearance and murky financial situations.
The prospect of loan forgiveness and finally closing that chapter of her life has Powell beaming: "I feel like I can shed a little bit of my weight now. Thank you, Jesus!"
"A little bit of hope has crept in," says Cynthia Malone, a licensed clinical social worker in Columbia, Mo. "There's a little bit more of a bounce to my step today."
Malone, like some of these borrowers, is hoping this bill will be the fix she needs to get her loans forgiven. In their present 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 claim forgiveness.
The current PSLF waiver runs out in October, so the clock is ticking.
Representative David E. Price, the North Carolina Democrat who co-sponsored the bill in the House, looks forward to the next step: "We're optimistic that a bill that passed the Senate by unanimous consent will be taken up by the House."