Student loans

Biden administration announces important updates to student loan forgiveness initiatives as waiver ends

The Biden administration on Tuesday announced new updates to student loan forgiveness initiatives for millions of federal borrowers, as a temporary waiver for public service borrowers ends this week.

Here’s what borrowers need to know.

Limited PSLF waiver ends this week

It’s the last week of the Limited PSLF Waiver, a temporary initiative the Biden administration signed into law last year to extend what counts as an “eligible payment” for the 10-year, 120-payment Civil Service Loan Relief Program. The flexibilities provided for by the derogation end on 31 October.

The Department of Education said 236,000 borrowers have so far obtained $14 billion in student loan forgiveness.

“We have transformed the lives of these borrowers and their families,” Education Secretary Miguel Cardona said in a speech to the press on Tuesday.

‘Next Chapter’ for Student Loan Forgiveness Programs

As the PSLF’s limited waiver program ends Oct. 31, the Department of Education said Tuesday that many of the waiver benefits will continue through the summer of 2023, as the administration begins to implement the “next chapter” of student loan relief under the IDR Account Adjustment Initiative. This initiative should now be effective by July 1.

According to the Ministry of Education, the IDR account adjustment “will provide borrowers with many of the same benefits as those who have already applied for the PSLF temporary changes” under the limited PSLF waiver. But it will also benefit millions of borrowers who do not work in the civil service.

As part of the IDR account adjustment, the Department of Education will be able to retroactively credit borrowers with time for 20- or 25-year student loan forgiveness programs under income-contingent repayment plans ( IDR), even if they are not already in such a plan. This will also continue to benefit borrowers on track for the PSLF.

As part of the IDR account adjustment, the Department of Education will provide credit to the IDR and PSLF:

  • Any month in which a borrower was in repayment status, whether payments were partial or late, loan type or repayment plan;
  • Months in which a borrower has spent at least 12 consecutive months of forbearance;
  • Months during which a borrower has spent at least 36 cumulative months in forbearance; and
  • Any month spent in adjournment (exception for school adjournment) before 2013.

“From November 2022, borrowers who have 20 years (240 monthly payments) or 25 years (300 monthly payments) of payments due to these changes will begin to receive loan releases, unless they choose to opt out. “, according to a Ministry of Education. Fact sheet. “Borrowers who applied for the PSLF before October 31, 2022 and who reach 120 payments due to the deferment and forbearance changes will also receive loan releases. The ministry will continue to implement waivers for borrowers who reach forgiveness thresholds in the months following November. In July 2023, the Department will automatically apply the same payment count treatment to all [Education Department]- managed loans for borrowers who do not otherwise reach the number of months required for forgiveness. Direct loan borrowers will be able to count these periods in the PSLF on loans borrowed as students for months in which they certify eligible employment.

The Ministry of Education originally indicated that these changes would be in place by January 1, 2023. However, the administration now indicates that these changes will be effective by July 1, 2023.

After July 1, new, more permanent PSLF regulatory updates will be put in place that will codify many (but not all) of the benefits of the limited PSLF waiver, including allowing borrowers to obtain credit for certain periods of deferment, as well as repayment periods before direct consolidation of credits.

How to Qualify for Student Loan Forgiveness Benefits, Including FFELP Loans

Borrowers who already have loans held by the Department of Education – including direct loans and FFELP loans held by the government – ​​can automatically see the benefits of adjusting the IDR account when the administration begins to implement implement these changes.

Borrowers with business-held FFELP loans can qualify for this relief if they consolidate those loans into a direct consolidation loan, according to Education Department officials. Borrowers with business-held FFELP loans must have consolidated their loans by July 1, 2023 to qualify for the relief, Education Undersecretary James Kvaal said on Tuesday. Kvall recommended that these borrowers consolidate “as soon as possible” but no later than May 1, 2023 to ensure they receive this relief (the direct loan consolidation process can take 30-60 days, and sometimes longer). ).

Student loan forgiveness under these initiatives is separate from one-time forgiveness

The benefits of the limited PSLF waiver, adjustment of the IDR account, and more permanent PSLF regulatory change are entirely separate from those of Biden one-time student loan cancellation initiative who can provide $10,000 or up to $20,000 in student loan forgiveness for eligible borrowers.

Last week, the 8th Circuit Court of Appeals temporarily suspended implementation of Biden’s one-time student loan forgiveness program in response to a legal challenge filed by a coalition of Republican-led states. However, this legal action only applies to the single cancellation program – not to the IDR or PSLF.

Furthermore, although commercially owned FFELP loans are excluded from relief under the Single Cancellation Initiative After the Biden administration reversed course several weeks ago in response to legal challenges, Department of Education officials confirmed on Tuesday that these FFELP loans can still potentially benefit from the IDR account adjustment and ultimately be eligible for student loan forgiveness, if consolidated into the direct loan program before the deadline next summer.

The Ministry of Education is expected to issue more detailed guidelines in the coming weeks.

Further Reading on Student Loan Forgiveness

5 crucial points to remember after the court suspended student loan forgiveness

Court Temporarily Blocks Biden’s Student Loan Forgiveness Plan — Here’s What It Means For Borrowers

In Reversal, Biden Administration Announces New Student Loan Forgiveness Eligibility Limits

Apply for student loan forgiveness? Don’t Make These 3 Mistakes