A student debt forgiveness program implemented by President Joe Biden’s administration is set to conclude at the end of this month. Biden’s administration introduced several student debt relief initiatives, resulting in the cancellation of at least $167 billion in student loans for approximately 5 million borrowers.
One significant aspect of these programs has been the income-driven repayment (IDR) account adjustments, which allow borrowers to make payments based on their income and family size. Many borrowers have seen their loan balances completely forgiven after 20 or 25 years under these plans.
Student Loan Update: Forgiveness Program Concludes This Month
Biden’s changes to these programs have also enabled borrowers to receive credit for past loan periods that were not previously counted toward their IDR plans. According to the Department of Education, more than 1 million borrowers have benefited from loan forgiveness through these IDR adjustments.
“If you’re on an IDR plan or working toward Public Service Loan Forgiveness (PSLF), your remaining loan balance gets forgiven after you make the required number of payments,” the Education Department explained regarding the IDR account adjustments.
“In the past, various reasons may have prevented certain months from being credited toward loan forgiveness—for example, when you were on a payment plan that wasn’t eligible. With this payment count adjustment, we will reconsider whether specific payments or months qualify toward your loan forgiveness,” the department added.
The Biden administration initially planned to complete the program’s implementation in August, but there is uncertainty for future borrowers hoping to benefit from the program. The Education Department currently expects that the payment count adjustment will be finalized by September 1, 2024.
When the adjustment is implemented, it will automatically apply to all Direct Loans and FFEL Program loans managed by the department at that time. This includes Direct Consolidation Loans that repaid privately held Perkins or FFEL Program loans disbursed before the adjustment.
While direct federal student loans are automatically eligible for IDR account adjustments, borrowers with certain FFEL (Federal Family Education Loan) debt were required to apply for the direct consolidation program by June 30.
The Education Department previously aimed to complete the IDR account adjustments by January 1 of this year but postponed the deadline to July 1. Now, borrowers have about a week left before the program ends.
Although the new deadline is September 1, borrowers might not see their loans immediately forgiven, as the full discharge process can take several months.
The IDR account adjustment program has faced legal challenges, with a federal appeals court blocking Biden’s SAVE plan, one of the most popular IDR plans. Approximately 8 million borrowers under the SAVE plan are currently seeing their loans put into forbearance as a result.
The court’s decision also raises concerns about the future of other IDR plans, including income-contingent repayment and pay-as-you-earn programs. Although Biden’s administration requested more information about the injunction’s impact on these plans, the court denied the request.
Michael Ryan, a finance expert and founder of michaelryanmoney.com, highlighted widespread issues with loan servicers miscounting borrowers’ qualifying payments under IDR plans and the PSLF program.
“The adjustment allowed the Department of Education to review borrowers’ payment histories to ensure they received credit for all eligible payments—even partial or late ones,” Ryan told Newsweek.
“This was crucial for borrowers who had been making payments for 20 or 25 years under IDR plans, or 10 years under PSLF, only to discover their progress hadn’t been accurately tracked.”
Ryan emphasized that the impact on millions of borrowers has been significant. “Providing major financial relief to borrowers who have been burdened with student debt for much of their adult lives,” he said. “People can now finally get out from under this burden and focus on building their futures.”
Given the uncertainty surrounding the future of IDR plans, Ryan advised borrowers who have not yet reached their forgiveness thresholds to stay vigilant about their repayment plans and remain informed about any new developments.
“Continuous oversight and responsibility in federal student aid programs are crucial,” Ryan said. “The IDR adjustment highlighted how administrative issues can significantly impact borrowers. While this initiative provided important relief, further reforms are necessary to address the root causes of the student debt crisis.”
Michael Lux, an attorney and founder of the Student Loan Sherpa, noted that many borrowers will find themselves much closer to the 20 or 25 years required for IDR forgiveness after the government finalizes its process this month.
“In many cases, pursuing forgiveness may now be a more effective strategy than repaying the loan in full,” Lux told Newsweek. “It is a great time to revisit your repayment history and review your strategy moving forward. The IDR adjustment could change the equation for many borrowers.”
Conclusion
As the student loan forgiveness program concludes, many borrowers have received significant relief through the income-driven repayment adjustments. However, with ongoing legal challenges and uncertainty surrounding future IDR plans, it is crucial for borrowers to stay informed and vigilant about their repayment strategies to ensure they make the most of available opportunities.
Q1. What is the student loan forgiveness program ending this month?
A. The student loan forgiveness program concluding this month involves income-driven repayment (IDR) account adjustments, allowing borrowers to make payments based on income and family size, leading to potential loan forgiveness after 20 or 25 years.
Q2. How many borrowers have benefited from the IDR account adjustments?
A. More than 1 million borrowers have received loan forgiveness through the IDR account adjustments.
Q3. When is the deadline for the IDR account adjustment program?
A. The deadline for the IDR account adjustment program is September 1, 2024.
Q4. What legal challenges have impacted the IDR adjustment program?
A. A federal appeals court blocked Biden’s SAVE plan, putting approximately 8 million borrowers’ loans into forbearance, and raised concerns about other IDR plans’ future.
Q5. Why is continuous oversight important for federal student aid programs?
A. Continuous oversight is essential to ensure that administrative issues do not negatively impact borrowers, as highlighted by the IDR adjustment, which addressed miscounted payments.
