On April 19, 20022, the Biden administration announced historic reforms for student loan forgiveness and Income-Driven Repayment plans. The Department of Education will be conducting a “one-time revision” of IDR payments or “account adjustment”. These changes are expected to bring many borrowers closer to forgiveness under Income-Driven Repayment (IDR) plans.
So what is an Income-Driven Repayment (IDR) plan and how does student loan forgiveness work? We hear a lot about Public Service Loan Forgiveness (PSLF) in the news, but we rarely hear about “IDR forgiveness” or “long-term forgiveness.” Whereas PSLF is only available to borrowers who work in the public sector, IDR forgiveness is a type of long-term forgiveness that is available to any borrower enrolled in one of the IDR plans (ICR, IBR, PAYE, or REPAYE).
Summary of the “One-Time Payment Count Revision”
When will these changes be implemented?
- around the fall of 2022 or “no sooner than Jan. 1, 2023”
This applies to:
- Direct loans and federally managed FFEL (Federal Family Education Loans)
The one-time account adjustment will give borrowers IDR forgiveness credit for:
- any period of “In Repayment” status regardless of payments made, loan type, or repayment plan
- certain periods of forbearance (also applies to PSLF forgiveness)
- certain periods of deferment prior to 2013
- repayment prior to consolidation
- any loans in repayment for at least 20 or 25 years (which means that these loans will be automatically forgiven if they are not currently enrolled on an IDR plan)
What to expect:
- if you have commercially held FFEL loans, you will likely have to consolidate the loan(s) to convert the FFEL loans into a Direct consolidation loan to benefit from the rule changes
- any qualifying payments made in excess of the forgiveness thresholds will be refunded
Summary of Permanent Fixes to IDR Rules
- implementation of accurate and uniform payment tracking that you can view yourself
- simplified payment counting that may include counting more loan statuses to count toward IDR forgiveness
How does this affect PSLF?
These rule changes affect PSLF applicants as well. You may see increased qualifying payment counts since periods of forbearance now receive credit if you certify qualifying employment. PSLF applicants do not have to do anything at this time.
What to expect
Just as the Department of Education did for the Limited PSLF Waiver, it is likely that they will announce more details in the form of a Q&A list that will be posted on www.studentaid.gov. For now, you should know that these are good changes that will benefit a lot of student loan borrowers and there is no immediate action item for now even if you are pursuing forgiveness on one of the IDR plans. We will keep you updated as more information comes out!