The Bien administration approved over 800,000 borrowers for student loan forgiveness last month under a one-time fix to income-driven repayment plans. Those approvals, first announced in July, totaled $39 billion in student debt relief.
This was just the first wave of student loan forgiveness under the IDR Account Adjustment, however. And the Education Department is suggesting that more debt relief is coming, possibly sometime this month.
Here’s the latest.
Student Loan Forgiveness Under Adjustment Initiative
The Biden administration announced the IDR Account Adjustment over a year ago as a “fix” to longstanding problems with income-driven repayment and Public Service Loan Forgiveness, or PSLF. IDR plans can provide borrowers with affordable monthly payments tied to their incomes, and eventual student loan forgiveness on any remaining balance after 20 or 25 years in the program. IDR is also a required element of PSLF, which can accelerate student loan forgiveness to as little as 10 years for borrowers who commit to working for certain nonprofit or government employers.
But these student loan programs were hampered by complicated rules and poor oversight. Loan servicers sometimes steered borrowers into other repayment plans or costly forbearances. Many borrowers saw their balances balloon over time due to capitalizing interest. And few ever saw the student loan forgiveness that they were entitled to under law, even after many years of repayment.
The Education Department has characterized the IDR Account Adjustment as a remedy for these historic problems. Under the temporary program, borrowers can receive credit toward loan forgiveness under IDR and PSLF for periods that wouldn’t have counted under the original rules governing those plans. This includes many periods of repayment, as well as certain periods of deferment and forbearance.
Student Loan Forgiveness Approved So Far
Last month’s $39 billion in student loan forgiveness represented the first wave of approvals under the IDR Account Adjustment. The Education Department determined that these borrowers had reached the threshold for IDR loan forgiveness based on the adjustment’s retroactive credit. That threshold is 25 years for borrowers with graduate school loans, and 20 years for borrowers with only undergraduate school loans.
“The Biden-Harris Administration has forgiven your federal student loan(s) listed below in full,” said the notices sent to hundreds of thousands of borrowers. “This debt relief was processed as part of the Biden-Harris Administration’s one-time account adjustment because your student loan(s) have been in repayment of at least 20 or 25 years.”
Borrowers have also been receiving credit toward loan forgiveness under PSLF via the adjustment, as well. The Biden administration has approved $45.7 billion in student loan forgiveness for 662,000 public servants, according to an Education Department statement released this week.
More Student Loan Forgiveness Coming This Month?
The IDR Account Adjustment is a one-time fix, but it’s actually being implemented in batches. The approvals from earlier this summer were just the first. The next wave of loan forgiveness may happen as soon as this month.
“The first group of eligible borrowers were informed by ED on July 14, 2023, that they have loans that qualified for forgiveness,” says Education Department guidance. “ED will continue to identify and notify borrowers who reach the necessary forgiveness threshold of 240 or 300 months’ worth of qualifying payments, depending on the repayment plan and type of loan. We will send these notifications out every two months until next year, at which point all borrowers who are not yet eligible for forgiveness will have their payment counts updated.”
The notifications will be sent directly by a borrower’s student loan servicer. Given recent changes to student loan servicing, the Education Department encourages borrowers to track their loan servicer and update their contact information at StudentAid.gov.
While the department will implement the IDR Account Adjustment automatically for Direct loan borrowers, those who have commercial federal loans through the Family Federal Education Loan (FFEL) program need to consolidate those loans through the federal Direct consolidation program prior the end of this year to benefit from the initiative.
Further Student Loan Forgiveness Reading
Timeline For Biden’s New Student Loan Forgiveness Plan Gets Clearer
Critical Day For Student Loan Borrowers Is Here — 4 Key Details
Biden Administration Announces $72 Million In Student Loan Forgiveness
Student Loan Forgiveness Update: What The Latest Court Victory Means For Borrowers
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