Shadows of college graduates
Insider spoke to married couples who combined their student debt balances into restrictive spousal loans.Getty Images
  • The best option for married couples was to combine their student loans.

  • The law makes it impossible to separate the loans, meaning those who would otherwise be eligible can't enroll in forgiveness programs.

  • Insider spoke to people with loans who believe a new law is the only way out of debt.

Russell and Kate Case were told that they should consolidate their student loans.

The practice allows married couples to combine their student-debt loads into one loan, which will allow them to make just a single monthly payment with one interest rate. It is thought that it is a more affordable option.

Doing so has prevented them from getting their debt forgiven under a program specifically for public servants like themselves. Russell and Kate have a combined student debt of over $300,000.

While their incomes are sufficient to support themselves and their families, the public-service work is not high-paying to the point that monthly student-loan bills cut into spending on other basic necessities.

I understand people need to repay their debt. Russell told Insider that if the government promises debt forgiveness for public servants after ten years, that's his biggest problem.

The joint consolidation loan program was shut down by Congress in 2006 after 13 years. The Public Service Loan Forgiveness program, which forgives student debt for public servants after ten years of qualified payments, was created in 2007, but those in public service with spouse loans did not know they would be barred from that relief.

The loans must be consolidated into a federal direct loan in order to be eligible for the program. Unless a new bill is passed, people who have the same financial profile but have different types of loans will not get relief from the program.

Russell and Kate realized that consolidation of their loans was not the best option for them, and they have since restructured some of their debt into private loans with a lower interest rate. They said they are holding out hope that those like them will be noticed by lawmakers and that will lead to a change in the law.

Russell said it was good to see people in the same boat. Everyone wants to get excited because they think something will change and then the rug gets pulled out, and then it gets to be a little like, why even try?

'We'll be okay, but we'll be in debt forever'

Rebecca LeRoy is in the same situation as Russell and Kate. LeRoy has worked at a Washington state nonprofit for over a decade, with her husband doing the same for nearly two decades. She doesn't qualify for the program, so she's looking at taking out loans for her kids when they go to college, and she's already making too much money.

We called our loan company a couple times to talk about the program, and we were able to get high up in the chain before we were told to stop applying.

LeRoy doesn't live beyond her means. She can't adequately service her debt at her current salary.

According to data obtained by the Student Borrower Protection Center and provided to Insider, only 776 of the 26,526 unique consolidated spousal loans are still in repayment. It should be easy for the government to lend them a hand, as they have done with other larger groups of borrowers, given that it is a small portion of the 45 million student-loan borrowers out there.

LeRoy said that the group would be in debt forever.

The only way out is with legislation

Lawmakers are aware of the challenges with loans when it comes to divorce and domestic violence, as well as the inability to separate loans upon divorce or domestic violence.

The Joint Consolidation Loan Separation Act of 2021, introduced by Warner and Price, would allow borrowers to split their loans into two separate loans.

Price told Insider that the Joint Consolidation Loan Separation Act was created in response to his customer's experience with a damaging joint consolidation loan.

He said that borrowers nationwide remain liable for their potentially abusive or uncommunicative former partner's portion of their consolidated debt. My colleagues and I were happy to introduce this common-sense, bipartisan legislation, and we hope to get it passed into law soon.

There is a time constraint for passing this legislation, and the Education Department recently announced a Waiver of the Public Service Loan Forgiveness Act, which will allow past payments to count toward forgiveness, if they are made before October 31st.

Kate Case said they would divorce if divorce allowed them to separate their loans.

The original article is on Business Insider.

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