July 14th, 804,000 long-term student loan borrowers I’m starting to get word that the remaining $39 billion in debt will be forgiven as a result of the Department of Education’s action. Income Repayment (IDR) account adjustment. This one-time program was first announced in April 2022 to repair past failures in the IDR system and will count more past repayment periods towards income-driven repayment (IDR) exemptions. Many borrowers are at least three years closer to IDR forgiveness, and some will automatically have their loans completely forgiven.
“Millions of borrowers had loan forgiveness at the start of the new administration, but were not able to receive it. “Today, we are maintaining deals we have presented to borrowers who have completed decades of repayment.”
This is just the tip of the iceberg. More than 4.4 million borrowers have paid off their loans for at least 20 years, and 2.3 million of them have never defaulted or defaulted on their loans, according to April 2021 data provided to Senator Elizabeth Warren by the Department of Education. However, the final number of total borrowers who will be exempt from IDR account reconciliation is still pending, said Mike Pearce, executive director of the Student Borrower Protection Center (SBPC).
“If I were the borrower, I would feel pretty good if something like this happened, but you know, we never say never,” Pierce says. “This is an issue that has never been brought before a federal judge, and there are no indications that it will.”
All this is happening as the borrower prepares. student loan payments resume in October. Here’s what you need to know about the next wave of loan forgiveness under IDR account adjustments and what eligible borrowers can do to prepare for it.
When will the IDR adjustment take place?
The education ministry said it plans to notify those eligible for loan forgiveness about every two months. The first major batch he announced on July 14th, so borrowers can expect him to announce the next by mid-September.
The ministry plans to apply account adjustments by the end of 2023 to all borrowers who have reached a payment amount sufficient for exemption. All other borrowers will receive at least three more years of credit towards his IDR loan forgiveness in 2024.
Am I exempt from IDR account adjustments?
You must count your past payments yourself to see if you are eligible for loan forgiveness under a one-time IDR account reconciliation.
In general, borrowers with undergraduate loans are eligible for loan forgiveness if they make at least 240 student loan payments a month, and some graduate student loan borrowers reach loan forgiveness if they make at least 300 monthly payments, Pearce said.
Beginning in July 1994, the adjustment will count the following periods towards the 240 or 300 payments required to reach the exemption:
Months in which the borrower has repaid, even if the payments were late or partial. It doesn’t matter what kind of repayment plan you have.
A period of endurance lasting 12 consecutive months or more, or a cumulative total of 36 months or more.
Months postponed before 2013 other than on-campus postponements.
Months spent in economic hardship or military postponement since January 1, 2013.
Months of repayment, grace, or eligible deferment prior to loan consolidation.
Months spent in default are generally not included in the recount, but borrowers enrolled in the Temporary Fresh Start Program to come out of default will receive IDR credit from March 2020 through the date they come out of default.
Log in to your Federal Student Aid (FSA) account at: StudentAid.gov Check how long you have been paying. Please request account history from your servicer for more information, including a description of specific grace or deferment periods.
How to prepare for IDR account reconciliation
Loan forgiveness is almost automatic for most eligible federal borrowers with older direct loans, federally held Federal Family Education Loan Program (FFELP) loans, and parental PLUS loans. These borrowers do not need to take any action to qualify for or receive loan forgiveness.
“The good news is that for most people, you don’t have to actually be an expert in the program to benefit from it,” says Pearce. “If you have a loan owned by the Department of Education, that will work.”
However, there are some small steps you can take to be proactive.
Update contact information
Regardless of the type of federal student loan you own, make sure your current contact information is on both your FSA and servicer accounts. Make sure you have the passwords for these accounts and reset your login credentials if necessary.
The Consumer Financial Protection Bureau estimated in June that 44% of federal borrowers were transferred to new servicers during the pandemic payment suspension, so now is also a good time to see if servicers have changed.
You may be notified by email if your loan is forgiven under an IDR reconciliation, but you may also receive student loan communications by mail.
Consolidate Commercially Managed Federal Loans
Some federal loans are held by private entities rather than the government. Borrowers on these commercially managed federal loans cannot automatically benefit from recounts. To qualify, you must consolidate these loans. Bank reconciliation counts pre-consolidation repayment periods towards IDR exemption.
Commercially held loans include certain FFELP loans, Perkins loans, and Health Education Assistance Loan (HEAL) program loans. You can see the types of loans you hold in your FSA account or on your Servicer Portal dashboard.
We need to consolidate our commercial loans by the end of 2023, but don’t delay. The full integration process could take him 30 to 60 days, Pierce said.Get started by submitting Direct loan summary application On the website of the Federal Office of Student Aid.
Consolidate new parent plus loan
Parent PLUS loans are included in IDR credit reconciliation. Once the payment reaches 300 or his 120 if eligible for the PSLF, the parent’s PLUS debt will be automatically forgiven this year, regardless of whether the PLUS loan is consolidated.
However, if you pay less than that, you have to act. To benefit from the adjustment, parent consolidate her PLUS loan by the end of 2023 and enroll in her IDR plan called Income Dependent Repayment to continue progressing towards forgiveness.
Apply for Public Service Loan Forgiveness
Borrowers subject to the PSLF are also subject to account reconciliation. Only 10 years later, or after his 120 eligible payments, he can get an IDR loan forgiveness. PSLF eligible borrowers who take direct loans, including parent PLUS loans, will automatically benefit. Those who hold her Federally or Commercially Managed FFELP loans must consolidate them into Direct Consolidated Loans by the end of 2023 to obtain her PSLF credit under account reconciliation.
Once the adjustments have been applied to your account, you will see credits towards PSLF for the months you were in repayment and had qualifying employment beginning in October 2007.
“If you have applied for the PSLF or plan to apply and prove employment, you may realize the benefits of this adjustment to your eligible payment amount,” wrote the Federal Office of Student Aid. Please do this as soon as possible to ensure that you benefit from the recount.
Check Your State’s Tax Policy
The federal government does not tax debt forgiven as a result of IDR account reconciliation.
However, some states, such as Indiana and Mississippi, treat forgiven student loans as taxable earned income, so you may be taxed on the amount of the forgiven debt. The majority of states don’t do this, so check your state’s rules.
You can opt out of loan forgiveness if you’re worried about your state tax bill. You must do this within 30 days of receiving notice that the remaining debt has been forgiven under the IDR account adjustment.