Biparty bill would solve decades-old student loan problem for divorced Americans
In 1992, Congress attempted to combat student loan default rates by creating a law in the Higher Education Act that allowed married couples to consolidate debt with their spouses.
Almost 30 years later, lawmakers are trying to pass new law to deal with the unintended consequences of divorce and the feuds of some of those borrowers over consolidated debt.
A bipartisan group of lawmakers – comprising Representatives David E. Price (D-NC), Greg Murphy (R-NC) and Haley Stevens (D-MI), in addition to Senators Mark Warner (D-VA), Marco Rubio ( R-FL) and John Cornyn (R-TX) – have now reintroduced the Joint Consolidation Loan Separation Act to help these borrowers.
“This bill is a direct response to my constituent’s experience with a damaging joint consolidation loan,” Congressman Price said in a press release. “I introduced this bill to relieve borrowers who are victims of abusive or uncommunicative spouses by allowing them to terminate these loans. The impact on borrowers is often crippling and I am grateful for the bipartisan support this bill has common sense has received. Congressional action is long overdue. “
The unity between prominent Republican and Democratic lawmakers on a student loan issue – a controversial subject – is due to how serious they think the problem is.
“Survivors of domestic violence who try to sever financial ties with their abusive partner should be able to do so,” said Senator Rubio. “This bipartisan, common sense bill will ensure that survivors no longer find themselves in a position of being responsible for their abuser’s student loan debt. This bill is long overdue and I hope it will be passed quickly by the Senate. “
Based on ED’s estimates, lawmakers believe as many as 120,000 now divorced couples consolidated their loans under the original legislation.
“A married couple … can be treated as if it were an individual loan”
In 1992, as the country struggled with alarming default rates on student loans, Congress introduced a series of debt consolidation programs to help borrowers repay.
“A married couple, each of whom benefits from an eligible student loan, can be treated as if they were an individual borrower”, specifies the text, adding later that “if this couple agrees to be held jointly and severally responsible for repaying a consolidation loan … and without regard to any subsequent changes that may arise in the martial status of such a couple. “
Thus, from January 1, 1993 to June 30, 2006, married borrowers could be jointly and severally liable for the repayment of the loan via the US Department of Education.
Many borrowers decided to continue with consolidation at the time, believing that it could be beneficial for their personal finances. But the debtors told Yahoo Finance that years later they regretted their decision.
“It’s a nightmare,” Montana resident Honor Mann, who saw her tax refunds seized and her salary seized as she struggled with her and her ex’s student debt, told Yahoo Finance. -married for over a decade. “No one will help us. No one will separate him so that we never have to face each other again.”
Congress ended the program in 2006, but did not allow divorced borrowers to separate loans.
“For 15 years, Congress has failed to correct an oversight that leaves survivors of domestic violence to foot the bill for their abuser’s student loan debt,” said Senator Warner. “We should make it easier, not harder, for domestic violence survivors to move on and heal, away from their former partners.… And with bipartisan support for this bill, I hope we can finally do something.
Price and other lawmakers first introduced the Joint Consolidation Loan Separation Act in May 2019 to allow divorced spouses to separate their loans.
Specifically, the law would allow debtors to divide their balance proportionally into two federal direct loans so that they can pursue repayment on their own.
A borrower can also submit a request for debt separation if they are the victim of domestic or economic abuse or if they are unable to reasonably reach the other borrower.
Monica McLaughlin, director of public policy at the National Network to End Domestic Violence, said that when “survivors escape abuse, they should be able to start over without the debts of their abusers.” Therefore, she added, her organization supports the bill “to create a solution for survivors who have pooled loans in good faith or under duress and are now rebuilding their lives.”
Once the loan is separated, borrowers could transfer eligible past payments to income-tested repayment plans or to the Public Service Loan Forgiveness Program.
Aarthi is a reporter for Yahoo Finance. She can be contacted at firstname.lastname@example.org. Follow her on Twitter @aarthiswami.
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