Student-loan borrowers who combined their debt balances with a spouse are blocked from Biden's one-time debt relief

• Law prohibits student-loan borrowers with spousal loans to separate them into direct loans.
• This blocks them from qualifying for Biden's debt cancellation of $10,000 to $20,000 for federal borrowers.
• A bill recently passed the Senate that would allow those borrowers to separate their loans.

Millions of federal student-loan borrowers will soon see up to $20,000 cut from their debt balances — but a small group that consolidated their debt decades ago are out of luck.

In 2006, Congress shuttered the spousal joint consolidation loan program, which allowed married couples to combine their student debt balances with the idea that a single monthly payment with one interest rate would be more affordable.

But under current law, the separation of those loans is prohibited, meaning that if a couple divorces — or even in the case of domestic violence — both borrowers have to continue paying off the debt together.

That's particularly prohibitive following President Joe Biden's recent announcement of up to $20,000 in student-loan forgiveness for federal borrowers making under $125,000 a year. Only borrowers with federally-held loans are eligible for the one-time broad relief. While borrowers with some privately-held federal loans — like those in the FFEL program —  can consolidate their balance into direct student loans to access the debt cancellation, borrowers with spousal loans cannot separate their loans, and therefore, are blocked from Biden's loan forgiveness.

An FAQ on debt relief posted to studentaid.gov emphasized that "FFEL Joint Consolidation Loans, often referred to as spousal consolidation loans, are not eligible for consolidation into the Direct Loan program under current law."

Federal borrowers will have until December 2023 to apply for Biden's loan forgiveness through a form that will become live in early October, so it's up to Congress to pass a law before then that would allow for the separation of those loans for the 776 borrowers who still have them. 

Virginia Sen. Mark Warner sponsored the Joint Consolidation Loan Separation Act of 2021, which would allow borrowers to separate their spousal loans. It passed the Senate in June, and is now sitting in the House awaiting final passage. But not only is the broad student-loan forgiveness deadline weighing on those borrowers — those who are also public servants are in an even bigger time crunch to separate their loans.

Last year, the Education Department announced reforms to the Public Service Loan Forgiveness (PSLF) program, which is intended to forgive student debt for government and nonprofit workers after ten years of qualifying payments. Included in the reforms was a temporary waiver through October 31, 2022 that would allow any past payments to count toward forgiveness progress, including those previously deemed ineligible — but in order to qualify, the loan type must be a direct federal loan. Since spousal loan borrowers cannot separate their loans to consolidate them, they currently cannot benefit from the PSLF waiver expiring in under two months.

Insider previously spoke to Russell Case, a borrower who consolidated his loans with his wife but was not aware doing so would block him from PSLF relief.

"I understand people need to pay back their debt. I get that part," Case said. "But if the government promises debt forgiveness for public servants after ten years, and we find out after the fact our loans don't qualify, that's my biggest problem."