It has been nearly 18 years since Congress ended the joint consolidation loan (JCL) program; no new JCLs could be issued, and JCLs could not be reconsolidated or separated. Borrowers who were married and combined their individual federal student loans into a single joint Direct Consolidation Loan or joint Federal Consolidation Loan with their spouse continue to be mired by the inflexibility of that defunct loan program.
Unable to legally separate their loans post-joint consolidation (sometimes referred to as spousal consolidation loans), co-borrowers who had entered into agreements under the well-intentioned program were held liable for their spouse’s student loans regardless of their current marital status, incidents of domestic violence, economic abuse, or an unresponsive partner.
That changed on October 11, 2022, when President Joe Biden signed the bipartisan Joint Consolidation Loan Separation Act (JCLSA) into law. Spearheaded by Senator Mark Warner, in partnership with Representative David E. Price, the JCLSA provides relief to joint consolidation borrowers. The JCLSA will allow co-borrowers to apply and request to separate their joint loan obligations and reconsolidate into new individual Direct Consolidation Loans.
Additionally, for all borrowers, the new individual Direct Consolidation loans will be eligible for Income-Driven Repayment (IDR) payment plans and Public Service Loan Forgiveness (PSLF). These benefits, which are already available to Direct Joint Consolidation Loan holders, will be available to Federal Family Education Loan (FFEL) Program Joint Consolidation Loan borrowers who take the necessary steps to separate and consolidate into individual Direct Consolidation Loans. Borrowers who take these steps by the timeline specified will have the opportunity to benefit from the Income-Driven Repayment (IDR) payment account adjustment, even if the application does not become available until after the adjustment occurs in 2024. Finally, FSA created a process for borrowers who took the required PSLF-specific steps before October 31, 2022, to benefit from the limited PSLF waiver once their loans are separated.
Implementing the JCLSA
Since the passage of the JCLSA, Federal Student Aid (FSA) has been working to create an application for joint consolidation loan co-borrowers. That Application and Promissory Note (App/Note) has undergone two rounds of public comment, the last of which concluded on June 06, 2024.
Over the next several weeks, FSA will finalize the App/Note intending to make it publicly available in the Fall of 2024, with processing to follow. Upon availability, borrowers will be able to submit a:
- Joint Application: Both co-borrowers submit individual App/Notes to the Department, which will separate the JCL and create a new, individual Direct Consolidation Loan for each individual; or,
- Separate Application: An individual JCL applicant submits an App/Note to the Department without regard to whether or when the co-borrower applies, if the applicant has experienced an act of domestic violence or economic abuse from the other co-borrower, or if they are unable to reasonably reach or access the loan information of the other co-borrower.
Once the loans are separated, the applicants’ loan obligation will be consolidated into a Direct Consolidation Loan if both borrowers completed the joint application process. For those who submit a separate application, the applicant’s loan obligation will follow the same process as the joint application process, but if the remaining co-borrower does not complete an application, their loan obligation will remain a JCL with one borrower.
In late fall, FSA hopes to open the process for applications, in collaboration with servicers and to begin processing applications, in partnership with federal student loan servicers, by the end of the year. We encourage borrowers and interested parties to monitor the Department’s Homeroom Blog, FSA’s Electronic Announcements page, and the dedicated Joint Consolidation Loan Separation News and Updates webpage for details on webinars and general updates for potential applicants during implementation.
Taking Advantage Now
In an electronic announcement published on July 19, 2023, FSA provided guidance to federal loan servicers and Federal Family Education Loan (FFEL) loan holders and servicers on granting forbearance or payment suspension to joint consolidation loan borrowers wishing to separate their joint loan obligations into new, individual Direct Consolidation loans in accordance with the Joint Consolidation Loan Separation Act (JCLSA).
To prevent joint consolidation Direct Loan borrowers from facing financial challenges while waiting for the loan separation process to start, borrowers may request their joint consolidation loan be placed into forbearance until the application and separation process is available. When the application process opens, the forbearance will be removed for all joint consolidation loan borrowers who requested it, and it will be the responsibility of these borrowers to apply to separate their loans.
Direct Loan borrowers interested in the forbearance should contact the FSA Ombudsman’s group and indicate that they intend to apply for separation of their joint consolidation loans when the new application become available.
The Department has also proactively contacted FFEL loan holders and servicers, providing targeted outreach regarding the JCLSA and actions borrowers can take in preparation for the application’s public availability. The Department has encouraged FFEL lenders to grant forbearances or payment suspensions to joint federal consolidation loan borrowers who request forbearance or payment suspension to assist them in managing their outstanding loan obligations until the joint consolidation separate process is implemented, recognizing that the decision to do so is at the discretion of the FFEL loan holder.
The Department appreciates those stakeholders and advocates who have worked hard to achieve this important legislative fix. We understand that many borrowers are depending on the flexibility the JCLSA provides and have been waiting a long time for this relief. As we near the App/Note rollout, the Department has been working hard to support borrowers who intend to submit a JCLSA application and will continue to do so. We are committed to providing this much needed relief by implementing the JCLSA as quickly as possible.
U.S. Department of Education
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