Millions of borrowers could potentially have their entire balances completely erased. However, many borrowers must act before the Administration's deadline of December 31, 2023. Here is what you need to know on President Biden's IDR Waiver program and how it can be used to significantly reduce the duration of your student loan repayment journey.
What’s the IDR Account Adjustment?
This $39 billion is just a fraction of the over $200 billion potentially eligible for tax-free cancellation. Millions of borrowers who have been repaying their student loans for over 20 years will automatically qualify for student loan forgiveness due to this account adjustment. Borrowers who don't meet the 20 or 25-year requirement for forgiveness could still reduce their repayment period, even if immediate cancellation isn't an option. See below to determine if you might qualify.
The IDR Waiver broadened assistance to a much larger group of borrowers and repayment statuses from the previous limited-time waiver. All borrowers can now receive credit toward IDR forgiveness for any type of repayment plan, as well as qualifying forbearance periods and some types of deferment.
The PSLF Waiver only helped public servants. Plus, it only awarded credit for the time a borrower was in an actual repayment plan.
Like the PSLF Waiver, borrowers with commercially-held debt with the Federal Family Education Loan program (FFEL) must consolidate to qualify.
The IDR (Income Driven Repayment) Account Adjustment will grant borrowers retroactive credit to help their previous payments count towards their 20- to 25-year repayment plans. The IDR Account Adjustment will also apply to borrowers working towards PSLF.
If you are on an Income-Driven Repayment plan, this initiative will retroactively credit you for any month where you were in:
- Repayment status, regardless of late payments, partial payments, loan type, or repayment plan
- Eligible repayment, deferment, or forbearance status before consolidation
- Forbearance (up to 36 consecutive months)
- Deferment, prior-2013
Previously, these payments and conditions did not count towards a borrower’s IDR plan, meaning they couldn’t qualify for their 20- or 25-year forgiveness plans.
With this adjustment, many IDR and PSLF borrowers will be retroactively granted credit for previously unqualified payments, getting them closer to, or even granting them, forgiveness.
Starting in November, IDR borrowers with 240 or 300 monthly payments under the new qualifications will start seeing loan discharges. Similarly, PSLF borrowers with 120 qualifying payments under the adjustment will receive forgiveness.
IDR and PSLF borrowers will automatically see this change reflected in their accounts unless they previously opted out.
But, if the adjustment doesn’t completely knock out a borrower’s loan, they won’t see the adjustment until 2023, explains the Department of Education: “Borrowers who receive additional credit for IDR or PSLF through the one-time account adjustment but who do not reach the required monthly payments under the programs will have their accounts adjusted in July 2023.”
How Do I Qualify for this One-Time Adjustment?
This adjustment could benefit you if you are a borrower in an IDR plan or enrolled in PSLF.
However, only some federal student loans will qualify for the adjustment. Borrowers must hold:
- Direct Loans
- FFEL loans
To qualify for the adjustment.
If you are on IDR or PSLF and have other Department of Education loans, you must consolidate them into a Direct Loan to qualify.
Borrower with FFELP loans, or commercially held FFEL loans before 2010 must consolidate to qualify for the adjustment. Borrowers can consolidate in the Chipper app.
Tackling Debt is Tricky, But You Don’t Have to Do it Alone
The IDR Account Adjustment has the potential to make a huge impact on many borrowers. However, understanding its in and outs is complicated.
