Joint spousal consolidation loans originated in 1993 so that spouses could combine their student loan debt into a single consolidated loan. This allowed them to have a single monthly payment, however, it also meant that spouses were responsible for each other’s debt. In 2006, this loan type was discontinued but the government failed to provide a way for borrowers to separate their consolidated loans, even in the face of extreme circumstances such as domestic or financial abuse.
Joint spousal consolidation loans can be federally held or commercially held. If they’re commercially held, they are called “FFEL Consolidation Loans.” Individuals with a joint spousal FFEL consolidation loan have historically had trouble pursuing Public Service Loan Forgiveness (PSLF) since they couldn’t consolidate their joint FFEL Consolidation loan into an eligible Direct Consolidation loan.
In October 2022, Congress passed the Joint Consolidation Loan Separation Act which allows borrowers to submit a joint application to the Department of Education to split their consolidated loan back into separate loans under each person’s name. Not only will separating the loan make it easier to pursue PSLF, but it will allow individuals to officially sever financial ties and obligations to previous partners that may no longer be a part of their lives.
For borrowers who have experienced domestic or financial abuse from the other borrower and/or are unable to reasonably access the individual’s loan information, a separate application may be submitted. If a borrower receives a separate consolidation loan due to those circumstances, the other individual borrower must become solely responsible for the remaining balance of the joint spousal consolidation loan.