This announcement provides guidance for federal loan servicers and Federal Family Education Loan (FFEL) loan holders and servicers on granting forbearance to joint consolidation loan borrowers wishing to separate their joint loan obligations into new, individual Direct Consolidation loans in accordance with the Joint Consolidation Loan Separation Act (JCLSA) that was signed into law on October 11, 2022.
The joint consolidation separation and new consolidation process will not be fully implemented until late 2024 at the earliest. To prevent joint consolidation loan borrowers from facing financial challenges while waiting for the loan separation process to become available, borrowers may request their joint consolidation loan be placed into a forbearance until the application and separation process is available.
Direct Loans and Department of Education (ED)-Held FFEL Loans
Borrowers with joint Direct Consolidation Loans and ED-held joint FFEL consolidation loans will need to contact their loan servicer to request a forbearance until the joint consolidation loan separation application and process becomes available if they wish to pause making payments until they can separate their joint loan obligation. Only one borrower needs to request the forbearance (see below for more information).
Interest will accrue during this forbearance but will not capitalize. This forbearance will be granted for one-year increments that will automatically renew without the borrower needing to request a new forbearance annually. The forbearance will begin on the first day of the month in which the borrower requests the forbearance. The forbearance will end 30 days after the joint consolidation loan separation application process becomes available. It will then be the borrower’s responsibility to apply to separate and consolidate into a new DL Consolidation loan.
Commercially-Held FFEL Loans
ED is requesting that all FFEL loan holders offer the same forbearance or payment suspension for all commercially-held FFEL joint consolidation loan borrowers who request a forbearance or payment suspension while they wait for the separation process to become available.
These borrowers cannot currently consolidate into DL to take advantage of more-generous income-driven repayment (IDR) plans and Public Service Loan Forgiveness (PSLF). Allowing these borrowers to postpone their payments while the separation process is developed will provide them financial relief while they wait for implementation. Granting the forbearance or payment suspension is not a requirement. This is at the discretion of the FFEL loan holder, but ED strongly encourages all FFEL loan holders to grant these forbearance or payment suspension requests to assist struggling borrowers.
The forbearance or payment suspension for these joint consolidation loan borrowers should be non-capitalizing and granted in one-year increments that will automatically renew without the borrower needing to request a new forbearance or payment suspension annually. The forbearance will begin on the first day of the month in which the borrower requested the forbearance or payment suspension. The forbearance or payment suspension would end when the joint consolidation loan separation application process becomes available. It will then be the borrower’s responsibility to apply to separate and consolidate into a new DL Consolidation loan.
One-Party Forbearance Request
Only one coborrower will be required to request the forbearance or payment suspension while waiting for the separation process to become available, provided that at least one coborrower has contacted the Federal Student Aid Ombudsman to indicate they wish to separate their joint consolidation loan. Granting the forbearance or payment suspension will not require both coborrowers to make the request.
The servicer or loan holder should email JointConsolidation@ed.gov to confirm the borrower has contacted the Ombudsman regarding their intent to separate their joint consolidation loan before granting the forbearance or payment suspension.
When the forbearance or payment suspension is granted, both coborrowers will be notified that it does not preclude either coborrower from making voluntary payments during the forbearance or payment suspension if they wish to do so.
We believe these forbearance procedures will alleviate the stress joint consolidation loan borrowers are facing while waiting for the joint consolidation loan separation process to become available. Please contact Jerry Wallace at Jerry.Wallace@ed.gov or Charee Champ at Charee.Champ@ed.gov for questions related to FFEL loans.