There is news on student loan forgiveness coming from the Biden administration with updated important deadlines and the timeline for borrowers hoping to receive student loan forgiveness under a one-time IDR account adjustment.
An Income-Driven Repayment plan adjustment is different from President Biden’s $10,000 forgiveness plan, announced at the same time. That one-time forgiveness effort is blocked by the courts at this time.
The IDR adjustment is one of a few ways the Biden administration is trying to reform student loan systems and aid borrowers.
Here’s what borrowers should know:
IDR Account Adjustment May Provide Loan Forgiveness
In 2022, the Biden administration announced
the IDR Account Adjustment, a one-time fix to address ongoing issues with federal Income-Driven Repayment plans.
Presently, there are four types of IDR plans that let borrowers make payments on their federal student loans according to a formula based on income and family size.
The system is intended to assist lower-income borrowers to make progress on payments without being overwhelmed by their loans, but there have been problems since the beginning: The Education Department and its contracted loan servicers did not always inform borrowers about IDR options, and recent reports confirmed advocates’ issues the programs were being mismanaged. The multiple types of plans can be hard to understand and difficult to navigate.
The Biden administration wants to use IDR Account Adjustment to address those issues.
- A retroactive credit toward a borrower’s 20- or 25-year student loan forgiveness term, even if they are not currently in an IDR plan.
- A credit toward Public Service Loan Forgiveness for qualifying borrowers.
- A credit for Parent PLUS borrowers.
Borrowers who reach the 20- or 25-year threshold for student loan forgiveness following the adjustment would get a full discharge and a refund of any excess payments. Millions of additional borrowers will receive new credit toward their repayment term, inching 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.
Timelines and Deadlines
Initially, the Education Department told borrowers they would begin receiving student loan forgiveness by Fall 2022.
Now, officials say expected student loan forgiveness will occur in the spring, and borrowers receiving adjustments will see changes in 2024.
Applying for an IDR Account Adjustment Retroactive Credit
There is no formal application required to receive the retroactive credit. But borrowers do need to continue repaying their loans under an IDR plan to continue making progress toward forgiveness.
Borrowers with non-Direct and non-government-held federal student loans need to consolidate those loans
into the federal Direct consolidation program to benefit from the IDR Account Adjustment.
That deadline also has been extended.
“Borrowers who have commercially managed FFEL, Perkins, or Health Education Assistance Loan 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, according to a news article.
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Source: Various news reports