What joint borrowers should do to get federal debt relief

  • Biden just signed into law a bill that would allow borrowers with spousal loans to separate their balances.
  • That means they can now get federal relief through programs like the PSLF.
  • But the waiver for PSLF expires on October 31, leaving those borrowers little time to take advantage.

For more than a decade, federal law prohibited student loan borrowers who combined their balances with a spouse from splitting the loans, thereby preventing them from receiving federal debt relief.

President Joe Biden changed that by signing into law a bill that would allow those borrowers to split their loans — but they now have less than two weeks to use a key federal benefit before it expires.

The Spouse Consolidation Joint Loan Program gave married couples the ability to combine their balances, aiming for a more affordable monthly payment with a single interest rate. But in 2006, Congress shut down the program, meaning borrowers with spousal loans were legally barred from splitting them — and because the combined loans weren’t made directly by the federal government, they couldn’t s enroll in programs like the Public Service Loan Forgiveness (PSLF), which forgives student debt for government workers and nonprofits after ten years of qualifying payments.

But that dilemma no longer exists — earlier this month, Biden signed the Joint Consolidation Loan Separation Act of 2021, giving those borrowers the freedom to finally separate their balances and use federal relief. . Senator Mark Warner, one of the sponsors of the legislation, called it “a big win for people who have been stuck in these loans for decades.”

But many of those borrowers are also public servants, and they now have until Oct. 31 to use a PSLF waiver that allows past payments, including those previously deemed ineligible, to count toward forgiveness progress. On Tuesday, Federal Student Aid (FSA) updated its guidelines on the steps borrowers with spousal loans must take before this deadline to take advantage of waiver benefits.

“Because this law is new, it will take some time for the ED (Department of Education) to implement changes allowing borrowers to request the separation of their joint consolidation loan into individual consolidation loans,” says the website. Here are the steps you must take by the end of the month to notify the department of your intention to separate your loans:

  1. Find out if your employer is a government or an eligible non-profit organization by checking this search. The department will review your eligibility and notify you when this process is complete.
  2. Use the PSLF Help Tool no later than October 31 to generate a PSLF form and have it signed by your employer. Not send the form to MOHELA, the servicer who oversees PSLF.
  3. Submit a request for reconsideration. A specific process is now in place for borrowers with solidarity consolidation loans, and it requires you to submit a reconsideration request for PSLF and attach your signed PSLF form. When you download the attached form, you must indicate this in the description: “I am a borrower impacted by the Joint Consolidation Loans Separation Act.”
  4. If you are still waiting for the department to confirm your employer’s eligibility, you should still submit a request for reconsideration and include it in the description: “I am a borrower impacted by the Joint Consolidation Loans Separation Act. I have used the PSLF support tool and I am awaiting the opinion of my employer.”

While lawmakers like Warner are pushing for the department to extend the PSLF waiver to give borrowers more time to apply, the department is still sticking to the Oct. 31 deadline.

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