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Finally Relief is in Sight for Joint Consolidation Loans!

On Friday, the Senate passed a bill that would provide relief to thousands who have been trapped in a long battle with the Department of Education after a married couple had the misfortune of consolidating their loans.  While at first blush that may have seemed like a good idea, the joint spousal loan was not eligible for some of the best relief out there including income-driven plans and public service forgiveness.  We’ve tried to correct this problem by filing an adversary action in bankruptcy to obtain a similar result for our clients who were simply told “no” by the Department.  We were successful in doing so, up until the DeVos administration backtracked on us.

The Joint Consolidation Loan Separation (JCLs) Act of 2021 will:

  • Allow borrowers to submit an application to the Department of Education to split the JCL into two separate federal direct loans.
  • Allow two borrowers to submit a joint application to sever their JCL or allow one borrower to submit a separate application in certain circumstances, including when:
    • 1) One borrower is the victim of domestic or economic abuse; or
    • 2) One borrower has certified that the borrowers are unable to reasonably reach or access the loan information of the other borrower; or
    • 3) An individual application is deemed appropriate by the Secretary of Education.

The actual bill:

We’ll continue to monitor the bill and its wording including trying to determine under what circumstances an “individual application is deemed appropriate by ED”.  It’s possible that this may be limited to circumstances that separation of the loans would be in the best fiscal interests of the federal gov’t.  That’s how it is presently worded.  If that turns out to be the case, you’d have to argue that the gov’t has an interest in advancing public service or something to that effect.  On its face, forgiving the loan is not in the fiscal interest of the gov’t.  But we can try to get around that by arguing public policy and the benefits of advancing public service programs which is to the advantage of the fiscal interests of the government.

I’m looking forward to the challenge.  At least, we’ll have some more ammunition to make the argument soon!

If you’d like a 1 on 1 consultation about how we can help with your student loan debt, please fill out the intake form below.  Have a great 4th!

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