Last week, Congress passed a landmark bill that would allow those with spousal consolidation loans to split their loans between the couple. If signed by President Biden, this bill could make hundreds of borrowers eligible for federal student loan forgiveness and solve many problems associated with the program. Here’s what you need to know about this week’s student loan trends and how they may affect you.
1 current student loan trend for the week of September 26, 2022
1. Hundreds of borrowers with spousal consolidation loans could be eligible for loan separation
Prior to 2006, married student borrowers could combine their federal student loans into a single direct consolidation loan, often referred to as a joint consolidation loan or spousal consolidation loan. However, since the program closed in 2006, there has been no way for borrowers to reverse the process. This includes borrowers who have since separated and find themselves in financially detrimental situations, such as an ex-spouse refusing to make their share of the monthly payment.
Last June, the Senate approved the Joint Consolidation Loans Separation Act, which provided for the ability to separate joint consolidation loans into two separate federal direct loans. The remaining debt would be divided between the two borrowers according to the percentage that each borrower initially contributed. Last week, the House also passed the bill.
Now that Congress and the Senate have approved the bill, it’s up to President Biden to sign off on officially passing it.
How it affects student loans
If officially enacted, the Joint Consolidation Loan Separation Act could affect borrowers in multiple ways. On the one hand, it would allow borrowers in a prejudicial situation to be relieved of responsibility for the debt of their spouse, which means that they will only have to make payments on what they have borrowed from the origin (plus accrued interest). In the past, many of these borrowers may have continued to make payments on their spouse’s share of the balance to prevent the loan from defaulting and affecting their credit score.
Borrowers who split their loans could also become eligible for Biden’s student loan forgiveness measure, and they will have more flexibility in programs such as civil service loan forgiveness and income-contingent repayment, which limit both the extent to which joint consolidation loan borrowers could participate. .
Take away key
Congress passed the Joint Consolation Loan Separation Act, which would allow borrowers to split their joint consolidation loans. President Biden is expected to sign the bill.
Here’s how you can prepare
Whether you’re new to student loans or in the process of repaying, it’s wise to stay informed about how your student loan rates might change. In 2022, more opportunities for cheaper loans or loan forgiveness may open up; keep an eye on the Bankrate student loan news hub for the latest trends.