Much like the chaos of a Targaryen family dinner, the Joint Consolidation Loan Separation Act was signed into law today by President Biden – which creates an enormous timing problem.
While this is awesome news for borrowers of federal student loans who are trapped in this “One Way In, No Way Out” Spousal consolidation program where none of the newest and best ways to obtain forgiveness applies — there is one very large problem and that is timing.
You only have two weeks to take advantage of this change for public service work!!! Why isn’t this being talked about?
Well, the PSLF Waiver program ends October 31. Anyone with an older FFEL loan must file a consolidation application BEFORE October 31 to be included. The Waiver program allows payments which should have counted, now be counted toward the 120 monthly payments for full tax free forgiveness. So you have two weeks to get the consolidation app in. Normally for a joint spousal loan which is a a FFEL loan, consolidation is not allowed. The application to separate these spousal FFEL consolidation loans doesn’t exist yet – but with guidance coming out next week, should be available very soon. It’s unknown how long it will take to process those applications to separate the loans. Will it automatically change the loans to Direct, or will that be a second step, requiring a separate application?
The loans don’t automatically become Direct upon the filing a consolidation application also, it usually takes 30-45 days, longer right now due to everyone doing it at once. But to truly help those in public service, the deadline is Oct 31.
Our recommendation: file an application to re-consolidate spousal FFEL loans before October 31. Hopefully, it will be placed into a queue of some sort, awaiting the separation of the loans per this new Act, rather than be initially denied as history has shown.
Actually, I think a Targaryen family dinner would be less stressful!
We’ll have a short video on these spousal loans and the new Act up shortly on our You Tube Channel “Student Loan Sidebar” – please subscribe!
https://www.youtube.com/c/arkovichlaw