The US Department of Education said tens of thousands of borrowers will be eligible for “immediate” student loan forgiveness following sweeping changes to major federal student loan programs. But questions remain about the actual timing and implementation of this relief.
Biden passes historic changes to student loan forgiveness and income-contingent repayment programs
Last month, the Biden administration announced sweeping reforms to the federal Student Loan Income-Based Repayment (IDR) programs, which include Income-Based Repayment (IBR), Pay As You Earn (PAYE), and other plans linked to a borrower’s income.
Under IDR programs, borrowers can make payments on their student loans using a formula based on their income and family size. If there is a balance left at the end of their plan’s repayment term (which is 20 or 25 years, depending on the specific plan), that loan balance would be forgiven. IDR plans have also been a mandatory component of the Public Service Loan Forgiveness Program (PSLF), which can provide student loan forgiveness in as little as 10 years to borrowers who dedicate their careers to government work or personal goals. non-profit.
But within their original frameworks, the IDR and PSLF were plagued by complex rules and poor administration. Only payments made under an IDR plan (like IBR or PAYE) could be considered for loan cancellation. Payments made on other plans and periods of non-payment (such as deferrals and forbearances) would not qualify. In addition, federal loan consolidation would effectively boost a borrower’s repayment term, which would limit the number of payments to the borrower’s most recent consolidation.
Last October, the Biden administration announced major changes to the PSLF program to allow more repayment periods to qualify for student loan forgiveness. And then, in April, the administration dramatically expanded what can count toward student loan forgiveness under the IDR and PSLF programs. According to the Ministry of Education, civil servants will be able to count for the IDR and the PSLF:
- All previous months in which the borrower was in “repayment status”, regardless of the specific repayment plan or the timing or amount of a payment;
- 12 or more prior months of consecutive abstention, or 36 or more months of cumulative abstention;
- All previous months spent in deferment (with the exception of school deferment) before 2013; and
- Previous pre-consolidation repayment periods on federal consolidation loans.
The ministry also said that “any borrower whose loans have accrued repayment time of at least 20 or 25 years will see automatic forgiveness, even if you are not currently on an IDR plan.”
When will eligible borrowers get student loan forgiveness?
In its announcement, the Ministry of Education said the sweeping reforms “will bring borrowers closer to the public service loan”. [forgiveness] and the cancellation of the Income Contingent Repayment (IDR) by addressing historic failures in the administration of federal student loan programs.
Importantly, the ministry suggested that tens of thousands of borrowers will see quick benefits from the reforms. “Federal Student Aid (FSA) estimates that these changes will result in immediate debt forgiveness for at least 40,000 borrowers under the Public Service Loan Forgiveness (PSLF) scheme,” the department said in April. . “Several thousand borrowers with older loans will also receive a discount through IDR.” Millions more are expected to benefit in the years to come.
But the actual timing of this “immediate” student loan forgiveness remains unclear. The changes to the IDR payment tally will require significant administrative work from FSA officials, who are already working to implement previously announced changes to the PSLF, as well as changes to other federal lending programs. students such as disability releases and borrower defense against repayment. The Department of Education has not provided an update on the number of borrowers who have been approved for student loan forgiveness since its April 19 announcement.
And in fact, current Ministry guidance suggests that implementation of the IDR changes may not be complete for some time. “Full implementation of these changes… is estimated no earlier than January 1, 2023.”
More Questions Remain About Student Loan IDR Changes
Meanwhile, other questions regarding the Department’s implementation of the IDR changes remain unanswered.
The Department has not yet specified how far back in time it will count qualifying repayment, deferment, and forbearance periods toward a borrower’s IDR student loan forgiveness term. However, the ministry has indicated that it cannot account for payments to the PSLF until October 2007, when this program was first created. The first IDR program was enacted in 1994, but most IDR programs were created after 2007.
The Department has also not indicated how it will handle situations involving multiple consolidations. The Department says it will count “at any time in pre-consolidation repayment of consolidated loans,” but it’s unclear what will be counted if a borrower has consolidated their loans multiple times, or if required forbearance will count as cumulative over several consolidations. (the ministry says “36 months or more of cumulative forbearance” may count towards loan forgiveness, but did not provide further details than that). Under the PSLF waiver announced in October, the department said it would credit a federal consolidation loan with the maximum number of allowable payments based on the repayment history of the individual loans included in the consolidation, but it did not given the same assurances for the IDR corrections.
Ultimately, the Department says many of the changes will be implemented automatically sometime this year, and many borrowers may just have to wait and see what additional information, if any, the administration provides at the time. where she will begin to initiate the changes. In the meantime, the Ministry’s current guidelines are available here.
Further Reading on Student Loans
Thousands of Jobs Qualify for Expanded Student Loan Forgiveness Program
Who qualifies for student loan relief under Biden’s huge new income-based repayment expansion
Student Loan Forgiveness: Department of Education Launches Appeals Process for Civil Service Borrowers
Biden administration announces sweeping fixes to income-based repayment and student loan forgiveness programs