Important Update: The article was originally published on 12/12/23. On 12/18/23, the Department of Education extended the deadline to 4/30/24. We’d still like to see it extended by a couple of additional months, but the Department of Education deserves credit for making this borrower-friendly change.
Supreme Court battles and political rhetoric might get all the headlines, but the little-known Payment Count Adjustment is the program changing millions of lives for the better.
This one-time program was created to help borrowers who were confused about repayment rules or got bad advice from servicers.
In most cases, borrowers don’t have to take any action to benefit. However, consolidation is a critical step for some borrowers, and it has a firm deadline.
One-Time Payment Account Adjustment Basics
This site has already covered this program in great detail, but the highlights are worth repeating.
Previous periods in which borrowers were on ineligible repayment plans will now automatically count toward Public Service Loan Forgiveness and Income-Driven Repayment Forgiveness.
Additionally, many deferments and forbearances will also count.
The program may not have a sexy name or get much media attention, but it is a great tool to help borrowers get the credit they deserve for payments made toward their student loans.
The December 31, 2023, Deadline
For most borrowers, this account adjustment will happen automatically.
In most cases, it is scheduled to occur in 2024. That said, thanks to the adjustment, some borrowers have already reached PSLF or IDR forgiveness.
The problem category is borrowers with privately-held FFEL loans. These commercially-held loans are still technically federal loans, but they don’t always qualify for all federal programs. For example, borrowers with these loans had to make payments during the Covid-19 payment and interest pause.
Borrowers with these troublesome FFEL loans need to consolidate their loans into a federal direct loan to benefit from this program.
By consolidating FFEL borrowers will get full credit for their payment history from before the loan consolidation. Additionally, it will enable them to sign up for the new SAVE plan, which promises lower monthly payments.
Sherpa Note: FFEL borrowers who miss the deadline for the adjustment will still be able to sign up for SAVE if they later consolidate. However, these borrowers won’t get the benefit of the one-time adjustment. Thus, consolidating before the deadline is much better than waiting.
Moving the Deadline is Critical
Because some borrowers are required to take action to benefit, the success of the program depends upon borrower knowledge.
At this time, many borrowers are still learning about the one-time adjustment. Others haven’t heard about it yet. I know this for sure based on email exchanges with readers of this site.
The point of the adjustment is to help borrowers who didn’t get any guidance from their servicer or who got bad advice from their servicer. At present, servicers are failing the otherwise eligible FFEL borrowers by not informing them of the significance of the opportunity.
Dating back to the beginning of the repayment restart, wait times have routinely taken hours. The borrowers who did get to talk with a representative often got guidance that conflicted with what other representatives said. The Department of Education acknowledged the severity of the servicing mess when they withheld millions of dollars’ worth of payments to servicers for their failure.
By the time many borrowers finally get the help they need from their servicer, the December 31, 2023, deadline will have passed.
The current deadline also creates a potentially confusing scenario for borrowers.
Those who consolidate by December 31 receive a generous calculation method for determining progress toward PSLF or IDR forgiveness. Those who consolidate after July 1, 2024, will get created for the weighted average of their pre-consolidation progress. This calculation is less generous, but it won’t reset borrower progress toward forgiveness.
At this point, it isn’t clear how the Department of Education will handle credit for pre-consolidation payments for borrowers who consolidate in the first half of 2024. It would be absurd to punish borrowers who consolidate during this gray area, but for now, we don’t know what the Department of Education will do.
Moving the one-time adjustment and the generous calculation deadline to June 30, 2024, solves this issue. It also gives servicers time to get things squared away on their end and provides the Department of Education more time to reach out to potentially impacted borrowers.
Many borrowers leave comments and send emails alleging that they think their lender is somehow out to get them or intentionally making things difficult. I usually point out to these borrowers that incompetence is the most likely explanation. Servicers are overwhelmed and often confused, and this leads to mistakes.
In the case of the one-time adjustment, things are a bit more complicated.
To qualify, commercially-held FFEL borrowers must consolidate into a federal direct loan. For the borrower, their debt amount doesn’t really change. It just improves eligibility for forgiveness programs and repayment plans.
For the commercial lender, things change dramatically. Instead of receiving a monthly payment from the borrower, they receive a lump sum from the Department of Education, paying off the loan in full. In other words, they stop profiting from the debt.
I haven’t seen any evidence indicating that commercial lenders intentionally withhold this information from borrowers. However, I am saying there could be a significant incentive to keep borrowers ignorant about the one-time adjustment. The cure for this problem is for the Department of Education to make every effort to educate borrowers.
Hiding a deadline on New Year’s Eve will only raise more questions.
Previous Deadline Moves
Finally, it is worth noting that this deadline has already been moved multiple times.
When the one-time adjustment was first announced on April 19, 2022, the deadline to consolidate was by the end of 2022.
As the Covid-19 payment and interest pause kept getting extended, it also made sense to move the one-time adjustment consolidation deadline.
Servicers will be making the adjustment at some point in 2024 according to the Department of Education. Why impose an arbitrary early deadline on borrowers?
July 1, 2024, is the day the SAVE plan becomes fully implemented, and numerous other federal policies take effect. Moving the deadline to benefit from the one-time adjustment to June 30, 2023, addresses multiple issues and fits nicely with other federal changes.