Here’s When Borrowers Will Get Student Loan Forgiveness Under Biden’s Account Adjustment

While President Biden’s one-time student loan forgiveness program remains blocked by federal courts, other major student loan relief initiatives are continuing.

One of those other initiatives, called the IDR Account Adjustment, is just getting started. And borrowers may begin receiving loan forgiveness under that adjustment very soon.

Here’s what borrowers should know.

IDR Account Adjustment Will Provide Credit Towards Student Loan Forgiveness

The IDR Account Adjustment is a one-time initiative that will allow the Education Department to retroactively credit borrowers with time towards a 20-year or 25-year repayment term under income-driven repayment (IDR) plans, even if they have been repaying their loans under a different plan.

IDR plans allow borrowers to repay their loans based on a formula tied to their income and family size. After 20 or 25 years in repayment (depending on the plan), borrowers can receive complete student loan forgiveness.

But under the long-standing framework for IDR programs, only time spent in one of the available IDR plans, such as Income Based Repayment (IBR) or Pay As You Earn (PAYE), can count towards loan forgiveness. Time spent in repayment under other plans, as well as periods of deferment and forbearance, typically don’t count. And consolidating student loans can reset the clock. Consumer advocates have long accused federal student loan servicers of improperly steering millions of borrowers into costly forbearances, leading to substantial balance increases while lengthening a borrower’s repayment term.

Under the one-time fix provided by the IDR Account Adjustment, the Education Department will credit borrowers with time towards their IDR loan forgiveness term, even if they haven’t been in an IDR plan. According to published guidance, borrowers can receive credit for any month in repayment on any federal student loan (regardless of the type of federal loan or the repayment plan, or whether payments were partial or late), as well as certain deferment and forbearance periods and periods prior to loan consolidation. These periods will also count towards the 120 qualifying payments required for Public Service Loan Forgiveness (PSLF) if a borrower was working in qualifying PSLF employment at the time.

The Education Department “is focused on improving Income-Driven Repayment, Public Service Loan Forgiveness, and other student loan programs to help borrowers get the relief they have earned,” said Education Secretary Miguel Cardona in a tweet earlier this week.

The adjustments under the initiative will be implemented automatically for borrowers who already have federally-administered loans. But some borrowers may have to consolidate their loans via the federal Direct consolidation program to qualify. “Borrowers who have commercially managed FFEL, Perkins, Health Education Assistance Loan (HEAL) Program, or other non-Direct Loan loans should apply for a Direct Consolidation Loan by May 1, 2023, to get the full benefits of the one-time account adjustment,” according to the Education Department.

When Borrowers Will Receive Student Loan Forgiveness

The Education Department indicates that borrowers who reach the threshold for student loan forgiveness under the IDR Account Adjustment may start receiving discharges at any time.

“Based on the newly eligible months from the one-time account adjustment, borrowers who have reached 240 or 300 months’ worth of payments [the equivalent of 20 years or 25 years] for IDR forgiveness or 120 months of PSLF will begin to see their loans forgiven in November 2022,” according to published guidance. Borrowers will receive student loan forgiveness under the initiative on a rolling basis as the Education Department implements the adjustments in the coming weeks and months.

Borrowers who do not qualify for immediate student loan forgiveness may still receive significant retroactive credit towards loan forgiveness under the IDR Account Adjustment, advancing their progress towards eventual discharge of their student debt. “More than 3.6 million borrowers will receive at least three years of additional credit toward forgiveness under IDR,” according to the Education Department.

These borrowers will “see their accounts update in July 2023.” Borrowers who receive IDR credit under the adjustment, but end up short of the threshold required for immediate student loan forgivenes, would need to continue repaying their loans under an IDR plan to make ongoing progress towards loan cancellation.

Extension of Payment Pause Counts Towards PSLF and IDR Student Loan Forgiveness

Last month, President Biden announced that the ongoing student loan pause — which has suspended payments and interest on government-administered federal student loans since March 2020 — will be extended to June 30, 2023.

These months of suspended payments will continue to count towards student loan forgiveness under PSLF and IDR, even if no payments are made. So for borrowers who, after the IDR Account Adjustment, are only a few months short of the 240 or 300 months required for student loan forgiveness under IDR (or the 120 months required for loan forgiveness under PSLF), the extension of the student loan pause may be just enough to push some borrowers over the threshold.

Further Student Loan Forgiveness Reading

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