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Meet the Absolute Worst Federal Student Loan: FFEL Joint Consolidation

FFEL Joint Consolidation loans for spouses have limited options for repayment and forgiveness. They also become a nightmare in a divorce.

Written By: Michael P. Lux, Esq.

Last Updated:

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Meet the Absolute Worst Federal Student Loan: FFEL Joint Consolidation

FFEL Joint Consolidation loans for spouses have limited options for repayment and forgiveness. They also become a nightmare in a divorce.

Written By: Michael P. Lux, Esq.

Last Updated:

Affiliate Disclosure and Integrity Pledge

Great News Everyone! Congress recently passed legislation to allow borrowers to separate joint consolidation loans!

This article will be left up as originally written to serve as a resource and record of the loans that many borrowers struggled with, but the good news for borrowers with spousal loans is that separation is now possible.

All student loans are a pain. Some student loans have special rules that make repayment more complex and more expensive. Parent PLUS loans are notoriously complicated. However, one federal loan reigns supreme as the worst possible loan: FFEL Joint Consolidation.

The joint consolidation loans were created with good intentions. In an effort to combat growing default rates, in 1993, Congress started allowing borrowers to consolidate student loans with their spouses.

Fortunately for borrowers, this mess of a program was discontinued. However, many borrowers are still stuck with the devastating consequences of FFEL Joint Consolidation Loans.

What Makes FFEL Joint Consolidation Loans so Bad?

There are two fundamental issues with FFEL Joint Consolidation Loans.

One Student Loan for Two Borrowers

The first problem is that the debt is combined with your spouse. These loans are often called FFEL Spousal Consolidation Loans for this reason. Combining debt with your spouse might seem reasonable, but the devastating consequences of a divorce heavily outweigh any slight advantages.

The root problem for former couples is that the joint consolidation loan survives even if the marriage does not. A divorce decree cannot remove one spouse from the debt, nor can any other agreement. As far as the Department of Education is concerned, both people are legally responsible for the debt.

This issue becomes especially problematic for couples that have an ugly divorce or in circumstances where one spouse refuses to make payments. The Department of Education offers no help to borrowers dealing with a vindictive or deadbeat ex.

Limited Options to Eliminate Debt

The other big issue with FFEL Joint Consolidation Loans is that options for repayment and forgiveness are limited.

Spousal loans often slip through the cracks when the government creates new programs to help borrowers. For example, the recent PSLF expansion excludes borrowers with FFEL Joint Consolidation Loans.

Making matters worse is the fact that there are not that many FFEL Joint Consolidation borrowers. When a problem doesn’t impact a large number of Americans, Congress is less likely to take action to fix it.

The end result is that FFEL Joint Consolidation borrowers continue to get ignored, and borrowers face devastating outcomes.

FFEL Joint Consolidation Repayment Plans

Over the last decade, the federal government created several different repayment plans to help borrowers manage their debt. These plans are Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and IBR for New Borrowers. Unfortuantely, FFEL Joint Consolidation loans are not eligible for any of these plans.

Borrowers with individual FFEL loans have the option of consolidating their loans into a federal direct loan. Those who use this path can sign up for the REPAYE plan and get considerably lower monthly payments.

Unfortuantely, borrowers with FFEL Joint Consolidation Loans cannot consolidate into a direct loan. The Department of Education will not consolidate FFEL joint loans.

Thus, the best repayment plan for couples with FFEL joint consolidation loans is Income-Based Repayment (IBR). Enrollment for couples can be a bit complicated because both borrowers must request the same income-driven repayment plan. If your spouse or ex makes a mistake on the form or refuses to fill one out, payments default to the standard repayment plan.

FFEL Joint Consolidation Forgiveness

Borrowers with FFEL Joint Consolidation loans face a long path to student loan forgiveness.

For starters, Public Service Loan Forgiveness is not an option. Borrowers with individual FFEL loans can usually consolidate into a direct loan to qualify for PSLF. However, because borrowers cannot consolidate FFEL Joint loans into a direct loan, borrowers cannot gain eligibility for PSLF.

Thus, the most realistic path for most FFEL couple loans is Income-Based Repayment Forgiveness. After making 25 years’ worth of IBR payments, the remaining balance gets forgiven.

Sherpa Tip: I’ve heard of a few cases where borrowers with joint consolidation loans were able to successfully consolidate into a federal direct joint consolidation loan.

Even though the Department of Education makes it clear that consolidating joint loans into a direct loan isn’t permitted, it could still be worth a try.

Separating FFEL Spousal Loans

If FFEL Joint Consolidation loans are such a headache, the obvious solution is to separate the loans.

Unfortunately, this option is not currently available.

If there is one bit of good news for FFEL Joint Consolidation couples, it is the fact that there is bipartisan support for allowing couples to separate their student loans.

The Joint Consolidation Loan Separation Act hasn’t been passed in Congress yet. However, this is an issue where a few phone calls and emails could influence Congress to make something happen.

About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

14 thoughts on “Meet the Absolute Worst Federal Student Loan: FFEL Joint Consolidation”

  1. This is b.s..

    We’re not stupid people. When we consolidated in the early 2000s, consolidation seemed like a good way to reduce interest. We locked in a “low” 6% interest rate, and started making payments.

    Then the economy tanked and the fed left rates around 0-2% for a decade. Paid tens of thousands in extra interest that could have been avoided without the consolidation.

    THEN along came public service forgiveness. My wife would be eligible to have her 25k principle/interest forgiven. I am not. We knew this when PSLF came out years ago… but really got our hopes up when the Biden adminstration started opening up PSLF to make it easier to qualify.

    But you cant split or PSLF consolidated loans. And you can’t conolidate to nondirect loans. What the heck!

    Left behind again.

    Reply
  2. We were told by NelNet that the only way to get out of default and have a payment we could afford was to go into a Forbearance state while we consolidated our loans. So, we did; as a result, they added $46,000 in fees & interest to our loans. Then, we realized they put everything in my husband’s name with me as a Co-signer, not a co-borrower, even though all but $5,000 were my loans. They refused to speak to me about the loan because my name wasn’t on it. We believe they did this because I had spoken to them about a medical hardship, so they knew I was really sick. Now, after teaching for 30 years & taking a Disability Retirement, we still owe $83,000. This is almost 3 times what we borrowed, & we’ve paid back 204% so far. My husband is a public service worker too. NelNet told us to sell our cars and house if we couldn’t make the payments. Since they took my name off the loan as a co-borrower, it seems like we should be able to consolidate into a Direct Loan. Your thoughts?

    Reply
  3. One of the most frustrating things we dealt with was when I became eligible for social security disability. I began inquiring around 2011 about a discharge for my loans due to total and permanent disability. At first, Navient said it would not be possible. They said both of us would have to be total and permanently disabled. I fought and fought back with them, over many, many phone calls. Eventually by 2015 it was approved and separated by loan so that my specific individual loans would be discharged, but the loan terms remained the same, both of us would be responsible for my spouse’s portion. If they had done a literal separation of the loans and removed my name from the loan, my husband would have been able to use PSLF to have his forgiven because of many years of active duty in the Navy. We have gotten a lot of grief and repeated misinformation through the years with Sallie Mae and Navient. We were told up until 2018 that he would be able to have his portion forgiven, only to find out that it would not be. He owes more than his original loans were just as many other people do. While I am grateful my portion has been forgiven, I remain frustrated because he has been in the military for over 20 years now, and he should be able to get credit for that service.

    Reply
  4. If you are in this situation, please join our FaceBook group: Spousal Consolication.Do Us Part!

    This group seeks to assemble and organize spousal/joint consolidation debtors in order to collectively provide support, explore various avenues for loan relief specific to spousal consolidation, solicit and influence legislative support for the Joint Consolidation Loan Separation Act, find and ally with various student loan advocacies and to collectively take action towards the separation of our joint/spousal consolidation loans in order to take advantage of federal student loan forgiveness programs and benefits, and finally liberate divorcees and victims of domestic abuse from their former spouses. It is open to married and divorced debtors with federal Direct Loans (DL) or Federal Family Education Loan Program (FFELP) Sousal/Joint Consolidation Loans. Members can expect this group to be action oriented and can expect to be involved in regular teleconference meetings, focus groups, information collection and surveys and various other activities that serve to fulfill the group mission.

    Reply

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