I heard that April was Stress Awareness Month. Those of us who have, or work with, student loans can only laugh because it feels more like Stress Awareness Year! I have some great updates for you this month, however, most of which of positive. I’ll save the stressful stuff for the end.
Details for the One-Time Account Adjustment
After literally waiting for a year, we finally have the fine print on the one-time account adjustment for IDR (Income-Driven Repayment) programs. And I must say, it was worth the wait! This program is everything we hoped for and then some. Our full write-up can be found on our blog page, but here are a few highlights:
- Loan cancellations will happen later in 2023, with other adjustments taking place in 2024.
- If needed, you can consolidate loans any time before 12/31/23, and IDR/PSF payment credit will be based on whichever loan had the most credits prior to consolidation.
- If the adjustment results in loan forgiveness, refunds will be issued back to the date the DOE deems you hit the forgiveness mark (not the day they processed it).
- Residency forbearance counts towards PSLF/IDR forgiveness.
- No loans forgiven through 2026 will be taxed at the Federal level.
PSLF Form Goes Digital
If you’re familiar with the PSLF process, you know the form requires a wet signature from a designated official at your employer, certifying your position and work hours. However, ongoing improvements to the studentaid.gov website and form-flow are happening. One of the biggest enhancements is that the form can now be submitted to HR electronically! You now have the option to send the form to your HR representative by entering their email address when working your way through the PSLF Help Tool. Once HR completes their portion, your form will be electronically submitted to the PSLF servicer for processing. Just make sure to get the correct email address from HR in advance.
$6 Billion Borrower Defense Settlement Overcomes Final Hurdle
If you have no idea what this refers to, chances are it does not apply. But those who submitted borrower defense (aka “my college scammed me”) claims prior to June 22, 2022, have had a tension headache while a massive $6B settlement worked its way through multiple courts over the last year. The case was finally put to rest this month when the Supreme Court refused to take up the appeals request from some of the colleges involved. This action should close the book on the case, and cancellations will likely begin happening soon. For more details, see our full write-up here.
Behind the Curtain at DOE and Loan Servicers
Take a deep breath: it’s time for the bad news. There has never been a greater need for money and employees at the Dept of ED and its affiliated servicers. In short (ha!): payments are set to resume this summer, PSLF is exploding (in a good way), account adjustments should’ve been well underway by now, mass loan cancellation may be just weeks away, and finally, there is a massive overhaul about to happen with the payment plans. Nothing to worry about, right?
Yet with all that happening, Congress denied the funding increase the DOE requested. This is effectively a budget cut when considering inflation, and now they must do more work with less money. ED already reduced funding to servicers by 10%. In return, servicers cut their call hours by 10 hours each week. Check out Mohela’s new hours below. Need to call your servicer on the weekend? Too bad! We still have clients waiting for their PSLF waiver forms to process, and that ended back in October! Expect long delays with form processing and wait times for phone calls, just as millions of 2023 grads swamp an already backlogged system.
Mohela Hours of Operation:
Monday: 7 AM – 8 PM CT
Tuesday – Wednesday: 7 AM – 7 PM CT
Thursday – Friday: 7 AM – 5 PM CT
So, at this close of Stress Awareness Month, I cannot stress enough how important it is to keep your ear to ground over these next few months. I encourage you to be as proactive as possible with the pending return to payment. We expect to see a decision from SCOTUS on the Biden forgiveness plan in June. In addition to opening the flood gates with payments, I think that decision will impact other student loan initiatives as well.
Graduation season is upon us, and we’re also about to get backlogged with 2023 graduates ourselves. If you need assistance from us, be sure to schedule your consultation ASAP.
Til debt do us part…
Brandon Barfield is the President and Co-Founder of Student Loan Professor, and is nationally known as student loan expert for graduate health professions. Since 2011, Brandon has given hundreds of loan repayment presentations for schools, hospitals, and medical conferences across the country. With his diverse background in financial aid, financial planning and student loan advisory, Brandon has a broad understanding of the intricacies surrounding student loans, loan repayment strategies, and how they should be considered when graduates make other financial decisions.