Originally posted November 9th, 2022.
Revised April 25th, 2023.
After a full year of waiting we finally have the fine print on the “One-Time Account Adjustment” for Income Driven Repayment plans. This initiative is everything we hoped it would be, and then some!
As you may know, the family of Income-Driven Repayment (IDR) plans offer a number of benefits outside of PSLF. These plans, by name, are:
- Income-Contingent Repayment (ICR, est. 1993)
- Income-Based Repayment (IBR, est. 2009)
- Pay As You Earn (PAYE, est. 2012)
- Revised Pay As You Earn (REPAYE, est. 2015).
ALL of these plans qualify for PSLF, as well as loan forgiveness after 20 or 25 years of repayment, regardless of employment. Payments on these plans must be made on-time and in full to count moving forward. But on April 19th of 2022 the Dept. of Education announced a “One-Time Revision” of payment counts so that borrowers could achieve additional progress towards forgiveness.
This revision aligns closely with the PSLF Waiver, and awards forgiveness credit for the following loan statuses that previously did NOT qualify:
- Any months in which a borrower was in ANY repayment status, regardless of the payments made, loan type, or repayment plan.
- Borrowers who spent 12 or more months consecutively in forbearance (including residency forbearance), or 36 or more months in forbearance cumulatively.
- Months spent in deferment prior to 2013 (with the exception of in-school deferment).
- Any months spent in economic hardship or military deferments in 2013 or later;
- Any time in repayment prior to consolidation on consolidated loans.
ED further states that:
- Any borrower with loans that have accumulated time in repayment of at least 20 or 25 years will see automatic forgiveness, even if they are not currently on an IDR plan.
- If you have made qualifying payments that exceed forgiveness thresholds (20 or 25 years), you will receive a refund for your overpayment. This lookback period applies to payments dating back to 1994.
- 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 the end of 2023, to get the full benefits of the one-time account adjustment.
- Borrowers who have reached 240 or 300 months’ worth of payments for IDR forgiveness will begin to see their loans forgiven late in 2023. All other borrowers will see their accounts update in 2024.
These adjustments also apply to those pursuing Public Service Loan Forgiveness! The deadline to consolidate under the PSLF Waiver was 10/31/22, and this 12/31/23 consolidation option was not included in the original press release back in April. PSLF candidates who do not need to consolidate may see discharges on their account very soon.
These changes are primarily intended to benefit borrowers of non-Direct loans, and Direct loans which were not in IDRs before the CARES payment halt took effect in March 2020. There are, however, some opportunities for others benefit from the adjustment:
- Direct loan borrowers can intentionally consolidate loans with different IDR/PSLF counts, and receive maximum forgiveness credit for their entire portfolio. Think about undergrad loans that you perhaps made payments on prior to starting grad school.
- Another is example is that borrowers who forbeared their loans during residency can go back and certify that time for PSLF, and then get credit for that time when the adjustment takes place.
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.