New Education Dept Guidance for Federal Student Loan Forgiveness

Tens of millions of borrowers have not had to make a single payment during Biden’s Administration. Still, the real questions remains.

At the end of the program, are student loans forgiven?

From the beginning of his candidacy, forgiveness for student loans was a cornerstone of his campaign.

While already having cancelled $17 Billion in student debt, his education department continues to attempt to improve the programs and servicers assigned to assist borrowers.

Due to recent findings by NPR.com, federal IDR (Income Driven Repayment) programs are undergoing major changes by the Education Department. The documents uncovered by NPR offered surprising new revelations, which were also noticed by several congressional members.

For example, some servicers failed to properly track IDR payments, and many did not know when borrowers qualified for cancellation.

To address these and other shortcomings, the Ed Dept. Just announced a one-time adjustment to borrowers qualifying payment credits.

One-Time Forbearance Credit Adjustment

FSA (Federal Student Aid) will conduct a one-time account adjustment for borrowers who were previously placed into long-term forbearances. Forbearance periods that lasted longer than 12 consecutive months, or that lasted longer than 36 cumulative months, will be counted as IDR or PSLF (Public Service Loan Forgiveness) qualifying payment credits towards forgiveness of student loans. Borrowers who were steered into shorter forbearance periods may qualify for credits if they contact the FSA Ombudsman to file a complaint and seek an official account review.

Borrowers who are impacted by this one-time waiver will likely see these changes reflected in their accounts in the last quarter of 2022. For borrowers who have already made significant progress on an income-driven repayment plan, this could mean the cancellation of their remaining loan balance.

One Time IDR Payment Credit Adjustment

Any months in which borrowers made payments will count toward IDR, regardless of repayment plan. Even payments made prior to consolidation on consolidated loans will count. This fix is to correct data problems and past reporting inaccuracies. 

This one-time adjustment will count as qualifying time toward IDR forgiveness, including

• any months in which you had time in a repayment status, regardless of the payments made, loan type, or repayment plan.
• 12 or more months of consecutive forbearance or 36 or more months of cumulative forbearance toward IDR and PSLF forgiveness.
• months spent in deferment (except for in-school deferment) prior to 2013; and
• any time in repayment prior to consolidation on consolidated loans.

Any borrower with loans that have accumulated time in repayment of at least 20 or 25 years will see automatic forgiveness, even if you are not currently on an IDR plan.

If you have commercially held FFEL (Federal Family Education Loan) loans, you can only benefit from the IDR account adjustment if you consolidate before completion of these changes, which is estimated to be no sooner than Jan. 1, 2023. If you have made qualifying payments that exceed the forgiveness thresholds of your required 20 or 25 years, you will receive a refund for your overpayment.

Want to find out the current status of your loans? Speak with a TitanPrep Case manager today!