For millions of student loan borrowers, repaying federal student loans through an income-driven repayment (IDR) plan has always been a long and often arduous journey. However, the Biden Administration’s recent IDR Account Adjustment, often referred to as the IDR waiver, is poised to bring significant relief. This new adjustment allows various repayment periods and certain deferment or forbearance periods to count towards the 10-year Public Service Loan Forgiveness (PSLF) program and the 20- or 25-year IDR forgiveness programs.
A Lifeline for Millions of Borrowers
The IDR waiver represents a monumental shift in how repayment time is calculated, potentially leading to immediate forgiveness for millions of borrowers. The Administration has unexpectedly extended the deadline for taking advantage of this waiver to June 30, 2024, providing additional time for borrowers to benefit from this change. This extension was announced on May 15, 2024, following an initial expiration date of April 30.
What the IDR Waiver Means for Borrowers
The IDR Account Adjustment allows all borrowers to receive credit toward IDR forgiveness for any type of repayment plan. It also includes qualifying forbearance periods and certain types of deferment. This is a substantial expansion of eligibility, covering a broader range of borrowers and repayment statuses than previous initiatives.
For example, borrowers with loans from the Federal Family Education Loan (FFEL) program, which are commercially held, must consolidate their loans to qualify. It’s crucial to act by the June 30, 2024, deadline to ensure eligibility for these benefits. Consolidation can significantly enhance the chances of having balances forgiven under the new rules.
Real-World Impacts
Consider a recent case where a borrower had an old federal loan of $3,500 from 1998, and later took out $320,000 in federal parent-plus loans in the 2010s. By linking the repayment period of the older loan to the newer debt, the entire loan balance was forgiven due to the IDR waiver. This was possible because the cumulative repayment period exceeded 25 years, showcasing the transformative potential of this adjustment.
Who Benefits from the IDR Waiver?
Unlike the PSLF waiver, which was limited to public sector workers, the IDR waiver applies to all federal student loan borrowers, regardless of their employment sector. This means both private- and public-sector workers can benefit.
For borrowers pursuing PSLF, the waiver can provide credit toward the 10-year service requirement. Those not working toward PSLF can receive credit towards IDR forgiveness, which spans 20 or 25 years. For instance, a borrower who has been repaying undergraduate loans since 2006 can consolidate before the June 30, 2024, deadline and potentially receive up to 17 years of IDR payment credit. This would leave them needing only three additional years of payments for their loan balance to be forgiven.
Specifics on Deferment and Forbearance
The waiver also provides credit for periods of deferment and forbearance under specific conditions. Borrowers who have been in forbearance for more than 12 consecutive months or 36 cumulative months can receive credit toward forgiveness. For those with less than these thresholds, a review by the FSA Ombudsman may be necessary.
Expanding Forgiveness Eligibility
One of the most significant aspects of the IDR waiver is that it counts any repayment plan towards forgiveness, even those not traditionally eligible under IDR terms. For example, a borrower on an Extended Repayment Plan since 2002 can now receive credit for all those payments. This adjustment ensures that more borrowers can inch closer to or achieve complete forgiveness.
Taking Action
For borrowers, the first step is determining whether they have federal or private loans, which can be checked at studentaid.gov. Once confirmed, consolidation might be necessary, especially for those with commercially held FFEL loans. However, this must be approached with caution to avoid losing access to beneficial repayment plans. Rae Kaplan at Kaplan Law Firm can take out the guesswork and help you navigate this process to ensure that you are making the right decisions.
Key Takeaways
The Biden Administration’s IDR Account Adjustment is a landmark development in the realm of student loan repayment. By expanding the criteria for forgiveness and including various repayment periods, deferments, and forbearances, it offers a lifeline to millions of borrowers. If you’re a federal student loan borrower, understanding and leveraging this waiver could significantly reduce your repayment burden and potentially lead to substantial forgiveness of your remaining loan balance. Contact Rae Kaplan to take advantage of this opportunity before the June 30, 2024, deadline.
