For borrowers stuck in a joint consolidation loan (JCL), separating debt has long been a challenge—especially for those who experienced divorce, economic abuse, or domestic violence. However, the Joint Consolidation Loan Separation Act (JCLSA), signed into law on October 11, 2022, provides a path for separating these loans into individual Direct Consolidation Loans.
If you’re a JCL borrower, here’s how you can navigate this new process and take control of your individual debt.
History of Joint Consolidation Loans
Before July 1, 2006, married couples were allowed to consolidate their individual federal student loans into a single joint consolidation loan. These loans were available under both the William D. Ford Federal Direct Loan Program (Direct Loans) and the Federal Family Education Loan Program (FFEL). The intent was to simplify repayment for couples with multiple loans. However, it came with a significant drawback—both borrowers became jointly and severally liable for the entire loan balance, regardless of future changes in their marital status.
For many borrowers, this became a major issue after separation or divorce, as they were legally tied to their former spouse’s loan obligations. The Joint Consolidation Loan Separation Act (JCLSA) was enacted to fix this problem, allowing these joint loans to be separated into individual loans. This allows each borrower to gain access to better repayment options, such as income-driven repayment plans or Public Service Loan Forgiveness (PSLF).
Understanding the Joint Consolidation Loan Separation Act
The JCLSA allows joint consolidation borrowers to separate their loans into individual Direct Consolidation Loans. This applies to borrowers with both Direct Loans (DL) and Federal Family Education Loans (FFEL). By separating the loans, each borrower becomes responsible only for their portion of the debt, providing financial independence and access to a broader range of repayment options.
This process is divided into two phases: Requesting a Loan Separation (Phase I) and Separation (Phase II). Let’s break down how you can take advantage of this program.
Phase I: Requesting a Loan Separation
Starting on September 30, 2024, borrowers can begin the separation process by submitting the Combined Application to Separate a Joint Consolidation Loan and Direct Consolidation Loan Promissory Note (App/Note). This form is only available as a downloadable paper application, which must be completed, signed, and dated.
How to Apply:
- Download the application from the Federal Student Aid website.
- Fill out all required sections. You’ll need to provide information such as your Social Security Number, co-borrower details, and loan history.
- Sign and date the application. Incomplete or unsigned forms will delay processing.
- Mail the form to the Consolidation Originator listed on the application, ensuring all necessary pages (6-16) are included.
The Consolidation Originator will process and validate the application within 10 business days. If you mistakenly send the form to an FFEL servicer or loan holder, they are required to forward it to the Consolidation Originator. After Phase I, your application will be held until Phase II begins.
Phase II: Loan Separation Process
Once Phase II begins, the Consolidation Originator will separate your joint consolidation loan and create new individual Direct Consolidation Loans for each borrower. The Department of Education will notify you when this phase starts, and if additional documentation is required, they will follow up.
Remember that after the loans are separated, both borrowers will have their own individual loan balances based on the percentage of the original balance that was attributed to each borrower’s loans when the joint consolidation loan was made.
Application Options: Joint vs. Separate
There are two ways to apply for loan separation under the JCLSA:
Joint Application
If you and your co-borrower agree to separate the loan, you will each need to submit a separate App/Note to the Consolidation Originator. Once the loans are separated and re-consolidated into individual Direct Consolidation Loans, you and your co-borrower will no longer be jointly responsible for each other’s debt.
Separate Application
If you cannot submit a joint application with your co-borrower due to special circumstances, you can apply separately. This option is available if you certify that you:
- Have experienced domestic violence or economic abuse from your co-borrower, or
- Are unable to reasonably access your co-borrower’s loan information.
In these cases, your co-borrower will be notified that they are solely responsible for the remaining balance of the joint consolidation loan. They will also have the option to consolidate their remaining portion of the loan into a new Direct Consolidation Loan.
Special Considerations for Non-Applicant Borrowers
If the non-applicant borrower does not submit their own application, they will be responsible for the entire remaining balance of the joint consolidation loan. However, they may consolidate the loan later, allowing them to access benefits like Public Service Loan Forgiveness (PSLF) and income-driven repayment (IDR) plans.
If the non-applicant borrower does not take any action, the servicer will continue normal loan servicing and collection activities on the remaining balance.
Forbearance Options During the Separation Process
Borrowers can request temporary forbearance to help ease the burden while the loan separation process is ongoing. According to the Department of Education, FFEL loan holders are encouraged to offer forbearance or payment suspension for commercially held FFEL joint consolidation borrowers who apply for loan separation. This forbearance will remain in place until Phase II is complete and the loans are officially separated.
Separate Your Joint Consolidation Loans to Access Additional Benefits
For JCL borrowers, separating your joint loans under the Joint Consolidation Loan Separation Act offers a crucial opportunity to gain financial independence and access better repayment options. The process provides a path to more manageable debt, whether you’re applying jointly with your co-borrower or independently due to special circumstances.
If you’re in a joint consolidation loan, don’t wait—start your application today and take control of your individual financial future.
ABOUT THE AUTHOR
Meet Jay
Since I became a lawyer in 1995, I’ve represented people with problems involving student loans, consumer debts, mortgage foreclosures, collection abuse, and credit reports. Instead of gatekeeping my knowledge, I make as much of it available at no cost as possible on this site and my other social channels. I wrote every word on this site.
I’ve helped thousands of federal and private student loan borrowers lower their payments, negotiate settlements, get out of default and qualify for loan forgiveness programs. My practice includes defending student loan lawsuits filed by companies such as Navient and National Collegiate Student Loan Trust. In addition, I’ve represented thousands of individuals and families in Chapter 7 and Chapter 13 bankruptcy cases. I currently focus my law practice solely on student loan issues.
I played a central role in developing the Student Loan Law Workshop, where I helped to train over 350 lawyers on how to help people with student loan problems. I’ve spoken at events held by the National Association of Consumer Bankruptcy Attorneys, National Association of Consumer Advocates, and bar associations around the country. National news outlets regularly look to me for my insights on student loans and consumer debt issues.
I’m licensed to practice law in New York and California and advise federal student loan borrowers nationwide.
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