~Karen- Minnesota
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Hello Michael - Thanks for reaching out and seeking more information about this nonsensical situation in which joint spousal consolidation loan holders find themselves. If you use my story in an article, I’d prefer to be acknowledged by just my first name. The issue of student loans is such a hot topic these days, and people are so very bold and contentious.
Here is my story:
On a daily basis, I relive in my mind the worst mistake I have ever made in my adult life. Way back in 2001, as my husband’s student loans were coming out of their grace period, I had a conversation with a representative from Sallie Mae who had the bright idea that we should consolidate my student loans with my husband’s. At the time it seemed like it could certainly simplify things in our lives and I had no inclination that this consolidated loan would hold us back so greatly.
In the intervening years, we added three children to our family, and we kept up with the loan payments as best we could. In 2007, when the Public Service Loan Forgiveness program was launched, I felt a glimmer of hope until I learned that even though my husband, a high school art teacher, and I, a development director for a non-profit organization had the “right” jobs, we would be left behind, because we had the “wrong” loan.
In 2009 I lost my job during The Great Recession. The cost of providing child care, housing, transportation, food, and paying student loans took its toll, and we filed for bankruptcy that year. Another blow came when we learned that even through bankruptcy, our joint consolidated loan would live on.
Fast forward to 2020. We continue to pay the loan with an income based repayment plan. The balance continues to grow and our payments are not even covering the interest. The world is struck by an unknown virus and everyone begins to “stay safe at home.” The COVID-19 pandemic warranted protective measures for student loan holders, and the relief came as a payment pause and rollback of interest rates to 0% for federal student loans. Unfortunately FFELP loans are not considered federal, despite their name (Federal Family Education Loan Program) and the loans under this program did not receive those benefits. As such, we have continued to pay on our joint spousal consolidation loan throughout the pandemic.
Hope in our household was briefly renewed when the waiver program was launched in October 2021. The waiver would allow payments under other programs to qualify for public service loan forgiveness. Finally, we could get the spousal consolidation loan forgiven with both of us again employed by qualifying employers. After submitting an application for consolidation to the Direct Loan program and having it canceled, we learned that once again, we are being left behind. It feels like we are living on the Island of Misfit Toys. Even though Direct Spousal Consolidation loans are eligible for full or partial forgiveness, the FFELP spousal consolidated loans are not. This makes no sense to us, and really is not fair. With such widespread forgiveness happening, and carve-outs for specific situations, it seems arbitrary to hold back people like us, with this type of loan.
Every day, I think about this loan and how I wish I had not trusted the rep. at Sallie Mae who recommended this terrible idea. We agreed to it because there simply were no other options. Every day, I think about the interest that is growing which day-by-day adds more than $17 to our balance for the next payment. That’s about $500 every month that we have to pay in interest before anything is applied to the principal. We are locked in at 7.875% interest. An income based repayment plan and the capitalized interest that accrued every time we came out of a forbearance period have ballooned our loan balance to $74,889.19. Our original principal was $46,575. To date, we have paid $73,283 – $60,386 went to interest, and $12,897 went to the principal over 21 years!. The “estimated payoff date” for this loan is in May 2033. I will be 63 years old. If we were allowed to separate this loan, and consolidate each of them as Direct Loans, they would be eligible for immediate forgiveness based on the PSLF waiver.
These loans are so awful, Congress eliminated the issuance of new ones in 2006, but no off-ramp was provided for those like me who are stuck. A logical solution is the bipartisan, bicameral Joint Consolidation Loan Separation Act. It makes sense for couples who are no longer together, and for borrowers like us, who otherwise qualify for PSLF.
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