Update: Borrowers pursuing Public Service Loan Forgiveness (PSLF) will temporarily see missing payments on any separated Direct Consolidation Loans. Updated qualifying payment counts will display in spring 2026.
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 held federally or commercially. 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 FFEL Joint/Spousal 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 Education Department (ED) 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 also 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.
Separation Loan Details
The separated loan will be an amount equal to the current outstanding balance of the Joint/Spousal Consolidation Loan, multiplied by the percentage of that outstanding balance attributable to the individual loans of each borrower that were repaid by the Joint/Spousal Consolidation Loan, unless there is a divorce decree, court order, or other settlement agreement that specifies otherwise.
Each new Direct Consolidation Loan will initially have the same interest rate as the Joint/Spousal Consolidation Loan.
Joint/Spousal Consolidation Loan holders can separate their loan by submitting an application and promissory note, which will create a new Direct Consolidation Loan. There are two ways to apply, either with the co-borrower as a joint application or individually as a separate application.
Any separation applications submitted on or after July 1, 2025, will receive a weighted average of PSLF-eligible or IDR-eligible payments that were applied to the Joint/Spousal Consolidation Loan. However, if the Joint/Spousal Consolidation Loan is a FFEL Joint/Spousal Consolidation Loan, no payments will be credited for PSLF, and a weighted average of certain payments will be credited towards IDR forgiveness.
Before you continue, understand what's at stake:
- Separating your loans from your co-borrower will result in a new Direct Consolidation Loan. If your newly separated Direct Consolidation Loan disburses after July 1, you can still pursue PSLF by enrolling in RAP, which counts as a qualifying repayment plan.
- Your repayment plan options will change. If your newly separated Direct Consolidation Loan disburses on or after July 1, all of your loans, not just the newly consolidated ones, will only be eligible for the new Tiered Standard Plan or RAP (Repayment Assistance Plan). RAP is a new income-driven option, but it works differently from the IDR plans you may have access to now. If you don't separate, a FFEL Joint/Spousal Consolidation Loan will retain access to Income-Based Repayment (IBR), and a Direct Joint/Spousal Consolidation Loan will retain access to the legacy IDR plans.
- This cannot be undone. Once your separated Direct Consolidation Loan is originated, it cannot be reversed. The current IDR plans would be permanently unavailable, and your access to forbearance and deferment would be limited.