A win 16 years in the making for a group of student loan borrowers

Angela Powell married her college sweetheart — but since her divorce in 2014, the relationship has been tenuous. So when she learned Congress was about to make it possible for her to separate her student loans from his, after years of carrying his debt as well as her own, she couldn't contain her excitement.

"This is almost unbelievable," Powell says. "It's going to change lives, and it's going to change people's outlook on hope, and especially mine."

The bill in question, the Joint Consolidation Loan Separation Act, which President Biden is expected to sign this week, closes a loophole created in the 1990s, when Congress began allowing married couples to consolidate their student loans for a lower interest rate. It seemed like a good idea back then – a way for couples to save money on their loans and have a single monthly payment. Congress shuttered the program in 2006, but never passed a way to separate the loans.

Sixteen years later, about 14,000 borrowers are still shackled to each other – even after divorce, an NPR investigation found. In some cases, borrowers are being held responsible for debt that was linked with an abusive former spouse, forced to choose between paying a debt that isn't theirs or tanking their credit as they wait for a solution.

Powell's ex-spouse has not made regular payments to their loans since 2016, despite holding almost double the amount of debt back when they consolidated — leaving her with a monthly payment of $1,942.50.

Other borrowers, like Patrick Stebly, had an amicable divorce, but had to create a court agreement to manage payments every month. He's been working to close the joint consolidation loophole for over a decade.

"It's been such a fight all these years," Stebly says. He teared up when he heard the news. "I'm overjoyed with this, you know, finally, finally, finally getting corrected."

The new legislation will allow borrowers with joint consolidation loans to separate them proportionally based on their initial loan amount.

Borrowers must apply through the U.S. Education Department, which will ask both parties attached to the loan to sign a form separating the debts. However, if a borrower can show they experienced domestic violence or economic abuse from their former partner, or they are unable to reach their former partner, they can initiate the separation by themselves.

For many, the Joint Consolidation Loan Separation Act will also open a path to having their loans erased as part of the federal government's Public Service Loan Forgiveness (PSLF) program.

The bill passed with bipartisan support

The legislation was championed by Sen. Mark Warner, D-Va., and House Rep. David Price, D-N.C. Despite being introduced by Democrats, the bill passed unanimously in the Senate and with bipartisan support in the House – where 14 Republicans broke ranks to help pass the measure.

When the bill passed, advocates and borrowers cheered from the House floor balcony, including Chris Alldredge, who consolidated his loans with those of his wife in 2005. At the time, the couple didn't know that consolidating disqualified them from PSLF, which promises debt relief to federal student loan borrowers who spend 10 years in a public service job, like teaching or firefighting.

They've been working for years to separate their debts.

"I watched that gavel rise and I knew at that very moment that everything that had transpired over the last 16 years and everything that our group worked to do feverishly for the last eight months or so was finally going to come to a head," Alldredge says.

Alldredge and his wife help run a Facebook group with over 700 members who have been sharing their joint loan consolidation stories with lawmakers. Their representative, Trey Hollingsworth, was one of the Republicans who reached across the aisle and signed the bill.

The new law should clear a path to Public Service Loan Forgiveness

Cynthia Malone is a licensed clinical social worker with the public defender's office in Columbia, Mo. She's married to a probation officer, and between them they've worked decades in public service.

Like Alldredge, when Malone and her husband consolidated their student loans for a better interest rate, they didn't realize they were forfeiting the possibility of getting their debts forgiven through PSLF.

Malone says the hardest part of their situation is watching their colleagues with identical experience — but no spousal consolidation — get their debts canceled.

"We just resigned ourselves to paying," she says. "While a lot of our colleagues were getting relief under PSLF."

She felt left behind because of one choice they made a long time ago at the urging of their loan servicer.

Today, Malone and her husband still have a combined $110,000 in student loans. She's optimistic that the new legislation will allow them to get their loans forgiven through PSLF.

"I'm elated! Just over the moon. I am so, so, so, so happy," she says.

But, unfortunately, experts are less hopeful. That's because PSLF comes with its own complications. The troubled program has been plagued by mismanagement, and last year the Biden administration created a temporary waiver to make it easier for borrowers to qualify. That waiver expires at the end of October, giving borrowers who will benefit from the Joint Consolidation Loan Separation Act little time to separate their consolidated debts, then convert their loans into federal direct student loans and then apply for the PSLF waiver.

Abby Shafroth, director of the Student Loan Borrower Assistance Project, has worked with borrowers trying to claim PSLF under the current waiver. She says she's worried about the timing of this new legislation.

"My biggest concern is whether [the Education Department] will even have a process in place for borrowers to separate their loans before the Oct. 31 deadline," she says.

At the time of publication, the Education Department did not have a response to NPR's repeated requests for clarification on whether this group of borrowers will be processed in time to apply for the PSLF waiver.

Bryce McKibben, senior director at the Hope Center for College, Community, and Justice, says these borrowers are stuck in a kind of "purgatory" as they wait for the Education Department to figure out the next steps – which may take a while.

"I'm guessing this process takes at least a month or two from the point at which they make an application available."

McKibben says, due to the timing of the legislation, the department may choose to make a special extension for these borrowers or establish a one-track application from separation to PSLF consideration.

"That would be a policy change that I think would be completely within [the Education Department's] discretion," McKibben says. "All of these deadlines here are all arbitrary anyway."

The Education Department also quietly changed its website Thursday to exclude some privately held loans from its one-time debt relief program. It is unclear whether the joint consolidation loans fall in that category.

In a statement to NPR, the department said, they "will continue to explore additional legally-available options to provide relief" to the borrowers excluded. [Copyright 2022 NPR]