Student Loan Forgiveness Timeline And Deadlines Change Again In New Updates To One-Time Adjustment

Finance

The Biden administration has again updated key deadlines and the overall timeline for borrowers hoping to receive student loan forgiveness under a one-time IDR account adjustment. No formal announcement accompanied the quiet change to current Education Department guidance, which occurred this week.

Here’s what borrowers should know.

IDR Account Adjustment Can Provide Student Loan Forgiveness Benefits

Last year, the Biden administration announced the IDR Account Adjustment, a sweeping one-time fix to address ongoing issues with federal Income Driven Repayment (IDR) plans. IDR, which describes a collection of individual plans, allows borrowers to make payments on their federal student loans according to a formula based on their income and family size. IDR plans can also result in student loan forgiveness for any remaining unpaid balance after 20 or 25 years, depending on the specific plan.

Historically, for the most part, only time spent in an IDR plan would count towards student loan forgiveness. Periods of nonpayment, as well as most periods of deferment and forbearance, would not count. Consolidating a borrower’s student loans could also restart the clock on the loan forgiveness timeline. The Education Department and its contracted loan servicers did not always adequately inform borrowers about IDR options, and recent reports confirmed advocates’ concerns that the programs were being mismanaged.

The Biden administration implemented the IDR Account Adjustment as a fix to address these issues. Under the initiative, the Education Department will apply retroactive credit towards a borrower’s 20-or 25-year student loan forgiveness term, even if they are not presently in an IDR plan. Prior loan periods that can count include any past period of repayment on any type of federal loan under any type of repayment plan (including non-IDR plans), along with many prior periods of deferments and forbearance. Periods prior to loan consolidation can also be credited.

The IDR Account Adjustment credit can also count towards Public Service Loan Forgiveness (PSLF) for borrowers who work for qualifying nonprofit or government employers and meet all other PSLF eligibility criteria, effectively extending many of the benefits of the now-ended Limited PSLF Waiver. Parent PLUS borrowers can potentially benefit now, as well.

According to the guidance provided by the administration, borrowers who reach the 20-or-25 year threshold for student loan forgiveness following the adjustment would receive a full discharge, as well as a refund of any excess payments. Millions of additional borrowers will receive new credit towards their repayment term, getting them closer to eventual student loan forgiveness. Those borrowers would then need to continue repaying their loans under an IDR plan to make continued progress.

Education Department Updates Student Loan Forgiveness Timeline And Deadlines For Adjustment

The Education Department’s changes this week are just the latest, as key deadlines have already been pushed out several times.

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  • When the IDR Account Adjustment was first announced last spring, the Education Department advised borrowers that they would start receiving student loan forgiveness by the fall of 2022, and all other borrowers would receive the benefits of the adjustment by January 2023.
  • Then, last fall, while the Education Department maintained that borrowers eligible for immediate student loan forgiveness would still receive those benefits under the IDR Account Adjustment before the winter of 2022, all other borrowers would not receive retroactive IDR credit until July 2023.
  • In yet further updates in December of last year, the Education Department made additional tweaks to the timeline, pushing out expected student loan forgiveness under the adjustment to the spring of 2023, with all others receiving the benefits of the adjustment in the summer of 2023.

Now, the Education Department has quietly pushed out key dates even further. In the updates to the guidance released this week, the Education Department says it still anticipates borrowers eligible for immediate student loan forgiveness under the IDR Account Adjustment to receive those benefits sometime this spring. But now, “All other borrowers will see their accounts update in 2024” — which could translate to a delay of over one year.

The ongoing delays are due to the fact that Congress did not provide additional funding to the Office of Federal Student Aid in a recent budget bill, effectively tasking the Education Department with implementing this, and several other complex initiatives, with no funding to bring on additional staff or update computer systems.

Consolidation Deadline For IDR Account Adjustment Also Pushed Out

Borrowers who already have government-held federal student loans (such as Direct loans) can benefit from the IDR Account Adjustment automatically, and no formal application is required to receive the retroactive credit. That said, borrowers would need to continue repaying their loans under an IDR plan to continue making progress towards student loan forgiveness once they receive the retroactive credit.

Importantly, however, borrowers with non-Direct and non-government-held federal student loans would need to consolidate those loans into the federal Direct consolidation program in order to benefit from the IDR Account Adjustment. The department’s original consolidation deadline was January 1, 2023; the department then extended it to May 1, 2023.

In the most recent updates, the Education Department has pushed out the consolidation deadline even further. “Borrowers who have commercially managed FFEL, Perkins, or Health Education Assistance Loan (HEAL) Program loans should apply for a Direct Consolidation Loan by the end of 2023 to get the full benefits of the one-time account adjustment,” reads the current guidance.

This delay may actually be good news for borrowers, as it provides a much longer window of time for non-Direct loan borrowers to learn of the IDR Account Adjustment, assess its benefits, and consolidate if needed.

Borrowers should carefully read and evaluate the administration’s published guidance on the IDR adjustment. Given that the Education Department is updating this guidance periodically — often without any accompanying formal announcement — it is prudent to routinely check that website for changes.

Further Student Loan Forgiveness Reading

Student Loan Forgiveness: Whether Biden Extends Payment Pause Again May Depend On Supreme Court Ruling

4 Student Loan Forgiveness Updates After Supreme Court Hearing

Student Loan Forgiveness: 6 Big Takeaways From Landmark Supreme Court Hearing

What Happens If The Supreme Court Strikes Down Biden’s Student Loan Forgiveness Plan?

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