How to Split Up Your Joint Spousal Consolidation Student Loan

Student loan borrowers bound together by joint spousal loan consolidation will be able to split their debt starting in late 2024. President Joe Biden signed the Joint Consolidation Loan Separation Act into law in 2022.

The Education Department is still developing the loan separation process, but there will be two main routes: joint applications or separate applications.

Joint spousal consolidation loans haven’t been made since 2006. The program, which originated in 1993, allowed married couples to consolidate their federal student debt to have a single monthly payment and lower interest rate. But it also meant couples were legally on the hook for each other’s student loan debt, no matter what.

Before the policy change, there was no way to separate the legal obligation even in extreme circumstances.

If you have a joint spousal consolidation loan, here's what you need to know.

The problems with joint spousal consolidation loans

The new policy is expected to solve a problem that borrowers with these niche consolidation loans have long held: the inability to sever loan debt from one another even in cases of a divorce, an uncommunicative partner, domestic violence or financial abuse.

Joint spousal consolidation loans also make receiving benefits more difficult.

For example, to receive Public Service Loan Forgiveness, or PSLF, both spouses must meet employment requisites. That means both must be working full time for an eligible public service employer while together making 120 payments on an income-driven repayment plan.

And those eligibility requirements apply only to borrowers who have Direct Loan Program debt; Family Federal Education Loan program, or FFELP, borrowers with a joint consolidation loan can’t consolidate into a direct loan and qualify for PSLF.

» MORE: Pros and cons of student loan consolidation

Having a joint consolidation loan also likely means a higher repayment amount when borrowers apply for income-driven repayment plans. Both spouses must apply separately and request the same income-driven repayment plan and, regardless of how they file taxes (jointly or separately), the income-driven payment amount is determined by combining their income and debt amounts.

How can we separate our joint consolidation loans?

The application process for separating joint consolidation student loans is still under development. The Education Department says it will become available sometime in "late 2024." This represents a delayed release.

If approved for loan separation, your consolidated loan will be split proportionately to how much you originally owed as an individual, and you’ll retain the same interest rate you had with the joint consolidation loan. Basically, the new total you owe will be based on a percentage of the total loan that each borrower originally brought in.

There will be two application options:

• Joint application. Each coborrower must apply for loan separation. Their debt will be split into individual direct consolidation loans.

• Separate application. Only one of the coborrowers needs to apply. The coborrower who applies will have their portion of the debt converted into a direct consolidation loan; the other borrower will be responsible for the remaining balance on the original loan. This process is typically only available to borrowers who can certify they are victims of domestic violence or economic abuse.