President Joe Biden’s student loan forgiveness initiatives continue to draw both praise and criticism. But multiple programs are moving forward.
After the Supreme Court struck down Biden’s mass student debt cancellation plan last summer, the administration has been implementing a number of targeted initiatives through regulatory changes and executive actions. This has resulted in nearly $140 billion in loan forgiveness for millions of borrowers.
At the same time, the Education Department has been plowing ahead to create another student debt relief plan. The department completed a major step in that process last month.
Several key student loan forgiveness deadlines are approaching as temporary initiatives end, while new benefits might become available soon. Here are some critical dates.
Key Student Loan Forgiveness Date For Consolidation Under IDR Adjustment In April
The Biden administration has so far approved at least $46 billion in student loan forgiveness for nearly a million borrowers under the IDR Account Adjustment, a temporary initiative intended to provide a remedy for an array of past problems associated with income-driven repayment plans.
IDR plans, which tie a borrower’s monthly payment to their income and family size, are supposed to result in student loan forgiveness after 20 or 25 years in repayment under those programs. But for years, borrowers were given misinformation about IDR, steered into costly deferments and forbearances (which historically did not count), or were harmed by sloppy loan servicing. Consolidating loans could also have restarted the loan forgiveness clock.
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Under the IDR Account Adjustment, the Education Department can count many categories of past loan periods toward IDR loan forgiveness that historically wouldn’t have been eligible, including even certain periods of nonpayment. Periods prior to consolidation can also count. And for borrowers working in nonprofit or government jobs, the adjustment can also allow them to receive credit toward Public Service Loan Forgiveness, which can provide student loan forgiveness for public servants in as little as 10 years.
While many borrowers will benefit from the IDR Account Adjustment automatically, some need to consolidate their loans through the federal Direct loan program by April 30. This includes borrowers with privately-owned FFEL loans, as well as HEAL loans or Perkins loans. In addition, borrowers with multiple loans that have significantly different repayment histories can also benefit by consolidating, as the consolidation loan would be credited with the highest amount of IDR and PSLF credit based on the underlying loans, according to the Education Department.
While the consolidation process can take a month or two, the department indicates that borrowers must apply to consolidate before April 30 to benefit from the IDR Account Adjustment (even if processing doesn’t occur until after that deadline).
“Please note that submitting a consolidation application alone does not guarantee any benefits under the payment count adjustment,” says the department. “In general, it takes at least 60 days to process a Direct Consolidation Loan application and to disburse the new loan. This means that if you want to consolidate your loan(s) in order to get the benefit of the adjustment, you should submit a loan consolidation application by April 30, 2024.”
New Biden Student Loan Forgiveness Plan Regulations Expected In May
The Biden administration’s newest student loan forgiveness plan isn’t yet available. But the Education Department completed a key step in developing new regulations for the program last month, when it concluded a fourth round of negotiated rulemaking.
Biden’s new loan forgiveness plan will target relief toward certain groups of borrowers, such as those who have been in repayment for two decades or longer, those whose balances have ballooned over time, and borrowers who attended predatory schools. In addition, the administration has confirmed that borrowers experiencing financial hardship may also qualify for relief under the new plan.
With negotiated rulemaking now complete, the department is expected to publish final regulations governing the new student loan forgiveness plan as soon as May 1. That will then open up a period of public comment. Once that concludes, the department will be set to launch the program, likely sometime between fall of 2024 and the summer of 2025.
Student Loan Forgiveness Credit For IDR To Be Published In July
The Education Department expects to complete implementation of the IDR Account Adjustment by July 1, according to published guidance. By that time (or shortly thereafter), borrowers who receive IDR credit under the adjustment but fall short of the threshold for student loan forgiveness should know exactly where they stand on their 20- or 25-year repayment term. The department will publish IDR payment counts indicating how much IDR credit the borrower has received as a result of the account adjustment (although it is unclear exactly where this information will be, or how it will be communicated to borrowers).
“If you don’t reach the forgiveness milestones with the adjustment, you will need to enroll in an eligible plan after payment resumes to continue accruing credit toward forgiveness,” says Education Department guidance. That means that borrowers looking to continue progressing toward student loan forgiveness would need to enroll in an IDR plan if they have not already done so.
New Repayment Formula For SAVE Plan Debuts In July
July 1 is also a key date for Biden’s SAVE plan, a new income-driven repayment plan that the administration unveiled last all. Already, around 7.5 million borrowers have enrolled in the program. Like all IDR plans, SAVE results in student loan forgiveness after 20 or 25 years in repayment, all that can be sped up to as little as 10 years for those who borrowed small amounts initially.
SAVE features a favorable repayment formula, a generous income exemption (which has resulted in at least four million borrowers having no payment obligations), and an interest subsidy that will prevent any future long-term balance increases.
On July 1, new regulations go into effect that will further update SAVE’s repayment formula. This will cut monthly payments in half for borrowers who have only undergraduate student loans. Those who have a mix of graduate and undergraduate student loans will see a smaller reduction to their payments.
Additional Key Student Loan Forgiveness Dates In September
Later this fall, September becomes a key month for student loan forgiveness and repayment.
Two major initiatives designed to protect struggling borrowers will come to an end that month. This includes the transitionary “on-ramp period”, designed to prevent borrowers from defaulting and incurring credit report damage if they miss payments, as well as the Fresh Start program, which protects borrowers already in default on their federal student loans from collections activity and gives them a pathway back to good standing. Borrowers can only access federal student loan forgiveness under IDR and PSLF if they get out of default.
In addition, the Biden administration recently announced that it would be postponing annual IDR income recertification deadlines to September 30th at the earliest. This will give borrowers more time to stay at their current IDR payment amounts (although those who have experienced a decrease in income can request an IDR payment recalculation at any time).
