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Beware the Nightmare of Federal Joint Consolidation Loans

joint consolidation loans

Divorce is messy, but it’s even worse if you’ve got a joint federal student loan consolidation.

The Federal Joint Consolidation Loan was offered from the late ’90s to the mid 2000’s, and allowed married couples to consolidate their Federal student loans.

It seemed like a good idea to someone who clearly didn’t realize that sometimes a marriage simply doesn’t work out.

Unfortunately, there’s no way to separate a Federal Joint Consolidation Loan. If the married couple splits up, they both remain 100% legally liable to repay the debt.

I’ve seen a variety of divorce decrees attempt to deal with these loans, mostly in an idealistic way.  All of them allocate a percentage of liability to each party, ranging from a 50/50 split to 100 percent liability on just one party.  Many attempt to split it based on the percentage each contributed to the consolidated loan.  For example, if one spouse owed $25,000 and the other owed $75,000, they allocate liability at 25/75.

The Problem With Apportioning Liability

Here is why:

First: expectation of repayment. An extended term fixed payment for $100,000 is about $700 a month.  On a 25/75 split the parties are responsible for $175/$525 for up to 25 years.  Does any attorney expect each party to make these payments religiously for 300 months with no skipped payments?

Second: federal repayment plans. What if one of the parties could take advantage of Income Based Repayment (IBR) or Public Service Loan Forgiveness (PSLF)?  The extended term fixed payment plan mentioned above is not eligible for PSLF.  Further, in order to get IBR, BOTH parties must submit income information.  How many divorced couples would willingly turn over income information years and years after the divorce simply for the benefit of the other party?  What if one or both of the parties have remarried?  Should we expect everyone to share income information to allow one party PSLF?  It doesn’t matter what we expect, this is what the Dept of Ed expects.  This is simply unrealistic and ridiculous.

Third: liability.  A divorce decree does not alter the liability of a contract or promissory note.  If either party fails to pay as the decree orders, BOTH parties are liable for the failure.  BOTH parties will be subject to all of the horrendous collection remedies available.  Regardless of whether a party fails by accident or purposefully, the other is sure to suffer damages that may never be fixed.

Forth: they’re divorced for a reason!  A good percentage of divorce occurs because of finances.  Now these two are supposed to play nice to take care of this substantial debt?  If they do not trust each other with financial information, IBR is out the window (so is PSLF for that matter).  That means they are left with a balance based payment.  Many can’t afford it even if they do cooperate.  And what if one can pull their weight and the other can’t?  Are these two going to communicate for the sake of protecting their own credit?  Doubtful.  Worse, many want to forget their ex.  How can they when they are tied to them for quite possibly another 25-years, or more!  It is sure to be a sore spot for any 2nd marriage.

Other Problems

There is another issue with these loans, they cannot be altered.  This creates two problems:

  1. Folks who would normally qualify for PSLF cannot because they do not have the right kind of loan.  Only Direct Loans qualify for Public Service Loan Forgiveness.  If the Joint Consolidation Loan is a FFEL Loan, then both borrowers lose the benefit of Public Service Loan Forgiveness.
  2. Curing a default Joint Consolidation Loan is limited.  Normally a defaulted loan can be consolidated out of default.  Given the fact that this is already a consolidated loan, the only was to get back into repayment is through rehabilitation.It’s easy to envision a situation that involves a loan rehabilitated only to fall back into default when the couple splits. With nowhere to turn, the consolidated loan would likely remain in default for the rest of both borrowers’ lives.

It’s Time For Legislative Change

Congress and the Department of Education need to fix this issue NOW by allowing re-consolidation to Direct Loans for PSLF qualification and as a default cure.

There should also be a mechanism for these loans to be split up in the event of a marital split.

The Department, and taxpayers, are losing money be forcing people into default because payment options are limited through no fault of their own.

If this issue matters to you, I urge you to contact your Congressmen/women.  There is no negative affect to the government’s budget to fix this particular issue.

What To Do In the Meanwhile

If you’ve got a divorce decree that calls for your former spouse to pay a portion of a joint consolidation loan, make sure he or she lives up to his or her obligations. If not, go back to court to ask for the judge to do something about it.

Talk with the collection agency handling your defaulted joint consolidation loan and see if it will allow you to make payments in exchange for holding off on enforcement through a wage garnishment or tax refund offset.

Call the Federal Student Loan Ombudsman to ask for guidance.

Consider talking with a bankruptcy lawyer to see if that may help you, even if that help is temporary.

Whatever you do, you can’t afford to sit still.


  1. Sabina

    Thanks for explaining and sharing. My husband is going through this now. He cannot even get access to the account because it is in his ex’s name. Worse—she racked up even more student loan debt AFTER the divorce which was in 2003 to the tune of $450,000+ (he can’t get access to the account, but can see the total on his credit report). Who loans that kind of money to people AND expects to get repaid???

    I’m glad to hear that they do not consolidate loans for married people anymore. Just wish they could separate them.

  2. Maggie

    Hi Sabina – I’m in a similar boat with my ex. My ex continued his education after our divorce; those loans are not in my name or under the loan we consolidated as spouses in 2005. Hopefully your husband is okay in that regard. I’m in absolute hell with mine and fear my spouse defaulting, putting all of the hard work I’m doing down the toilet to pay his loans. It’s sickening. I started my life over and I’m still trapped by a man I don’t even have a kid with. Best of luck to you.

  3. Michael

    I am currently in this lovely problem. The joint loan is way more then we can afford, but there are not options, forebearance is just about gone, and since no changes are allowed we are basically in an area that allows legal harrasment, and even worse than that both of our incomes can be garnished. This Completely sucks, there should be a way to change to loan, unravel the loan, etc. Who the fuck was the stupid fuck that passed this and allowed no changes, and then took it away and made it to where most of the student loan laws do not apply to it. This is completely ruining my life!!!!

  4. Rosamond

    My husband and I are in this situation currently. We consolidated our loans under the pretense that it would be more simple to make one payment than two which it was until we needed to get a deferment due to unforeseen circumstances. We both had to qualify in order to get the deferment, which we didn’t. I am also a teacher and can’t take advantage of the PSLF because we consolidated. I think it is crazy that the loans can not be split, or that they can’t look at the disbursements and see which person obtained each loan and adjust accordingly. I don’t plan to default as that would ruin my credit; however, it would be nice to have a program that would help us out with this situation.

    • Ryan

      You can take advantage of PSLF if your a teacher and your Joint Loan Partner doesnt qualify, read up on your eligibility on any related website. The only problem is that 10 years after your service qualifies you for PSLF, they will forgive your part of the original loan, but…you WILl still be held liable for the other parties remaining debt. Go figure.

    • Amira Davis

      My husband and I are in the same situation. He is a police officer and can’t have his loans forgiven because I’m not in public service yet we were told we should consolidate years ago because the payments would be lower, etc. We’ve had a nightmarish time with Sallie Mae (now Navient) and basically the company is saying there is nothing they can do to help me. Isn’t there anything we can do?

      • Joshua Cohen

        Yes, contact your congressman. Then contact me, I have an idea.

  5. Leslie

    Please keep me posted. I am a teacher in Wisconsin. I make barely enough money to pay the mortgage…. my ex husband is a pilot and our joint loans total $254,000. My original loan amount was 25% of that amount. My ex hasnt paid child support in over 10 months and cannot keep a job. I have breakdowns often regarding this nightmare. Please keep me posted. I have sought attorneys….but to no avail.

  6. Amy

    I thought I was the only one going through this nightmare. We divorced 10 years ago, he agreed to pay the consolidation loan, and never did. It wasn’t in divorce papers but that would not have mattered anyway. 10 years later all deferment options are exhausted. We default in 34 days. After months of daily phone calls with Sallie Mae and daily attempts to contact my ex I reached his wife on Facebook. She was nice at first. I explained I’d been attempting to consolidate the loan with my other student loans and remove my ex to no avail. I explained that to get a graduated repayment plan my ex and I both had to call the lender. At first she said they have 3 kids and cannot afford to be garnished either. Then an hour later she wrote back after speaking to my ex to say they don’t believe me about both of us having to speak to lender, they don’t care about default. They refuse to make a simple 5minute phone call, and to ice the cake she threatened to sue me for harassment for contacting them about the loan! We owe 40k, it could be worse but I happen to work in child welfare so my income is extremely limited. So at 40 years old I had to give my landlord notice and am moving into my mother’s dining room to pay the loan past due balance and make the payments to avoid default. My ex is ex military and a decade ago was making twice my salary, probably makes 3 times as much now. He will be getting off free and clear whilst I spend the next 30 years residing in a dining room.

  7. Shannon DeBlieck

    It is somewhat relieving to know that I am not alone in this situation. I have made any and all payments on our joint consolidated student loans. My exhusband was ordered to pay the entire balance per our divorce decree yet won’t even acknowledge his child support debt let alone make a student loan payment. I’ve had my paychecks garnished. My tax refunds offset. I worked so hard to get the loans out of default to enroll in an IBR to find out I need his nonexistent financial information to qualify. He hasn’t even filed taxes in 5 years! It’s hard to believe that the government has allowed these collection practices to continue and that a judge doesn’t have the authority to modify the promissory note for joint student loans. I’m calling someone, anyone, that will listen. I can’t spend the rest of my life with that man destroying me financially…which is what he is being allowed to do.

  8. Tammy

    I am a nurse. I had 10k in student loan debt. My husband at the time went to a private college and racked up 55k of student loan debt. Sallie Mae advised us that if we consolidate our loans the payment would go down from approx 600 down to apprx. 300$. So of course we did, this was in the late 1990’s. When we divorced he agreed to pay all of the student loan if I took the credit card which would more than cover my 10k owed on the loan. We tried to get Sallie Mae to un-consolidate the loan and that was not an option. A few years later I end up unable to work and filed paper work to have my student loans forgiven. Sallie Mae takes off 13k of the loan for my disabilities BUT won’t take my name off of my ex husbands loan. So on my credit report I still have a 60k debt with my name on it that he does pay leaving me with bad credit and nothing I can do about it. Sallie Mae won’t take my name off his loan even though they know I am not able to work. THIS NEEDS TO BE FIXED IT IS SO UNFAIR………..

    • Joshua Cohen

      You need to write to your Congresspeople. They are the only people who can change this.