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Last week, Congress passed a historic 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 of the issues 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 trend within student loans for the week of Sept. 26, 2022
1. Hundreds of borrowers with Spousal Consolidation Loans could be eligible for loan separation
Prior to 2006, married student loan 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 hasn’t been a way for borrowers to reverse the process. This includes borrowers who have since separated and are in financially harmful situations, like a former spouse refusing to make their share of the monthly payment.
Back in June, the Senate approved the Joint Consolidation Loan Separation Act, which called 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 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’s signature to officially pass it.
How this affects student loans
If officially signed into law, the Joint Consolidation Loan Separation Act could affect borrowers in a multitude of ways. For one, it would allow borrowers in harmful situations to be free of responsibility for their spouse’s debt — meaning they will have to make payments only on what they originally borrowed (plus accrued interest). In the past, many of these borrowers may have continued making payments on their spouse’s share of the balance to avoid the loan going into default and affecting their credit score.
Borrowers who separate their loans could also become eligible for Biden’s student loan forgiveness measure, and they’ll have more flexibility in programs like Public Service Loan Forgiveness and income-driven repayment, both of which limit the extent to which Joint Consolidation Loan borrowers could participate.
Here’s how you can get prepared
Whether you’re new to student loans or well into repayment, it’s wise to stay informed about how your student loan rates could change. During 2022, more opportunities for cheaper loans or loan forgiveness could open up; keep an eye on the Bankrate student loans news hub for the latest trends.