Student loan borrowers should not refinance federal student loans into a private
joint consolidation loan without seriously considering the risks including losing valuable borrower rights and flexibility unique to federal loans.
So if one spouse would be ineligible for rolling a
FFEL joint consolidation loan into an individual FFEL consolidation loan, would they not be eligible for a new Direct Consolidation Loan?
Not that long ago I wrote an article, «This is One Way to Get FFEL Spousal Consolidation Loans Forgiven» in which a reader was looking for a way to deal with her previous FFEL
spousal joint consolidation loan with her ex-husband.
The law no longer
permits joint consolidation loans to be made, so joint FFEL Consolidation Loan borrowers can't jointly reconsolidate their FFEL Consolidation Loan into a Direct Consolidation Loan.
Can my and my spouse's
joint consolidation loan from the Federal Family Education Loan (FFEL) Program be consolidated into a Direct Consolidation Loan so that one or both of us can qualify for PSLF?
But what the Department of Education does not say is there is nothing that appears to restrict one person from taking out a new loan to satisfy the old
FEEL joint consolidation loan in their name alone.
They then go on to say, «However, the statutory and regulator terms and conditions that applied to
joint consolidation loans don't allow for this.»
The revisions include additional information based on questions that were submitted in response to the initial document and a new address to use when submitting information - only partial disability discharge packages to the Conditional Disability Discharge Unit
for joint consolidation loans, co-made PLUS loans, and loans with an endorser.
The Department says that borrowers
with joint consolidation loans may repay under the IBR / PAYE plan as long as both spouses qualify with partial financial hardships.
In accordance with the Final Regulations published in the Federal Register on November 1, 2012 (effective July 1, 2013), the U.S. Department of Education prepared this matrix to address questions
concerning Joint Consolidation Loans, PLUS loans with co-borrowers, and disabled endorsers.
The couple subsequently divorced and she is now stuck in this old FFEL
spousal joint consolidation loan without apparent options to seek loan forgiveness under a program she would otherwise be eligible for.
For example, if you were employed full - time by a qualifying employer when each of the required 120 payments was made, but your spouse never worked for a qualifying employer or worked for a qualifying employer only when some of the payments were made, the amount forgiven after the 120th qualifying payment would be the remaining balance of the loan attributable to the loans you originally received that were paid off by
the joint consolidation loan.
Another common problem is that partial discharge of
a joint consolidation loan under any of the discharge programs (other than death discharge) does not eliminate joint liability for the remaining balance.
Congress did not provide any solutions for borrowers who are stuck with
a joint consolidation loan.
The Department of Education has told me, «There are no specific regulations or other official written policies explicitly stating that one of the borrowers of a FFEL
joint consolidation loan may not individually re-consolidate that loan into a new Direct Consolidation Loan for which he or she would be solely responsible.»