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.
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.
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.
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.