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Federal Consolidation and the Student Loan Forgiveness Clock

Federal direct consolidation can have a huge influence on the IBR and PSLF loan forgiveness clocks.

Written By: Michael P. Lux, Esq.

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The rules regarding progess toward student loangiveness for those who consolidate are in a state of flux. The news is mostly positive for borrowers pursuing Public Service Loan Forgiveness (PSLF) and IDR forgiveness.

Because of more newsworthy forgiveness proposals and newly created repayment plans, the changes may have slipped under the radar of many borrowers.

Weirdly, there isn’t a simple new rule to explain. Instead, how much forgiveness progress you get credit for after consolidating your loans will depend in part upon when you consolidate your loan.

The IDR Payment Count Update and the Student Loan Forgiveness Clock

The best time for consolidation will be before April 30, 2024. 

The program is called the One-Time IDR Payment Count Adjustment, but it does far more than the very specific name implies.

For our purposes today, one key detail is that borrowers who consolidate using federal direct consolidation won’t lose any progress toward IDR forgiveness. Crucially, they also won’t lose progress towards PSLF either.

Additionally, borrowers also benefit from how the IDR payment count update awards credit. If you have one loan with 50 months worth of forgiveness progress and you combine it with another loan with 70 months of forgiveness credit, the consolidated loan will have 70 months worth of credit.

If you have FFEL or Perkins loans that need to be consolidated, be sure to get it done by the April 30, 2024, deadline. The online application is available through the Department of Education.

Sherpa Tip: If you are interested in enrolling in the new SAVE plan to benefit from lower monthly payments, consolidation is a necessary step for borrowers with FFEL and Perkins loans.

What about the limited waiver? During the Covid-19 payment and interest pause, the limited waiver program allowed borrowers to consolidate without losing progress toward PSLF.

That program has ended, but the IDR Count update helps borrowers accomplish many of the same goals.

How does the April 30, 2024 deadline work?

Even though the consolidation application only takes about 20 minutes to complete, the consolidation process usually takes a month or two to finalize.

Fortunately for borrowers, this deadline is pretty flexible.

As long as you complete your application by the deadline, you can still benefit from the IDR Count Update and the generous terms on forgiveness progress.

It’s also possible that this deadline might get extended, as it has already been extended a couple of times in the past. However, skipping this deadline in the hopes that it gets moved again would be a huge risk.

The Forgiveness Clock After SAVE Goes Live

When the SAVE plan was created, it tweaked a number of federal student loan policies.

Among the changes, borrowers who consolidate their loans won’t lose all of their progress toward loan forgiveness.

Notably, this change is part of the phase II implementation of the plan, meaning the rule won’t be in place until July 1, 2024.

Additionally, the new permanent rule is not as generous as the One-Time IDR Count Update provision. If a borrower has two loans with the same balance and one has 50 months toward IDR forgiveness, and the other has 70, the new combined loan gets credit for 60 months.

For those who wish to do the math on their own loans, the government uses the weighted average of progress.

A Possible Reset in Mid-2024?

In the past, consolidating your loans meant restarting progress toward loan forgiveness. It was a harsh rule that, thankfully, has been fixed.

However, at this point, it isn’t clear what will happen with loans consolidated after the IDR Count Update deadline passes and before SAVE is fully implemented.

I’d expect that either the IDR Count Update deadline gets pushed back until June 30, 2024, or the SAVE rules on forgiveness progress get implemented a little earlier.

However, as of this writing, it appears that borrowers who consolidate their federal loans in May or June may lose all of their progress toward forgiveness. This gap should get fixed, but if you miss the IDR Count update deadline, you will want to check on the status of this rule.

It’s conceivable that waiting until July might be the best move for borrowers who need to consolidate their FFEL or Perkins loans.

Stay Up to Date: Student loan rules are constantly changing, and temporary programs create deadlines that can’t be missed. To help manage this issue, I’ve created a monthly newsletter to keep borrowers up to date on the latest changes and upcoming deadlines.

Click here to sign up. You’ll receive at most one email per month, and I’ll do my best to make sure you don’t overlook any critical developments.

About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

24 thoughts on “Federal Consolidation and the Student Loan Forgiveness Clock”

  1. Michael,
    I appreciate everything you have put together. I took out my first loan in like 1995. I graduated in 2002. I had direct loans (sub and unsub), that I had been paying on the whole time I was in school. My exist interviewer said that my best bet was to consolidate my loans and get a low rate of 3.5% or 3% if I did autopay. I was on an income driven repayment plan. I was under the impression that I had to pay my loans for 20 years and then I was done. Even credit karma had my end date as October 2022.
    However, if I read your comment correctly, it sounds like I “lost” all those years of payments by consolidating in 2002?
    When I log into my account I only see 142 payments. I was on an income driven payment plan. I was notified that I would see an adjustment but I have not seen any adjustment to total payments yet. I am currently on the standard plan. I am not sure if I should switch?
    Finally, on the studentaid website I saw an * about 30 years for consolidated loans?

  2. Greetings, Michael. I appreciate your website. Here’s my question:
    I have 2 loans: one for $5,000 and another for $105,000.
    The $105,000 loan is a Direct Consolidation Loan. It includes loans that I’ve been paying for about 14 years now.
    The $5,000 loan was originated in 2019, thus it’s only been in repayment for 5 years.
    It’s tempting to do another Direct Consoliation Loan and combine the two so that the 5-year $5,000 loan can obtain the 14-year credit.
    However, is there any issue with consolidating a Direct Consolidation Loan with a fairly new loan?
    Also, I know you say “as long as we apply by December 31st” the IDR count will be applied. But what about hiccups at the famously imperfect Department of Education? I’d hate to roll the dice to save time on a $5,000 loan only to actually lose 14 years on the $105,000 loan because even though I applied before Dec 31, 2023, the loan never actually “consolidated” until early 2024. Your thoughts?

    • Fantastic question. Your understanding of the rules is correct as is your understanding of the potential for a headache in this situation.

      Normally, I would say combine them and get full credit. However, one loan is 20 times bigger than the other, so that is the one you want to make certain doesn’t get messed up. I can see your hesitation.

      You could look at it from this perspective: there might be peace of mind by keeping them seperate and not messing with a loan that has 14 years of progress. In your case, the cost of that peace of mind is about $5,000. Is it worth it to you?

      I know wait times to talk to servicers are really bad right now, but this is one situation where you might be better off calling and talking to them until you are confident they will get things right.

  3. Hi. I consolidated my numerous federal student loans into two rollup loans (one for subsidized and one for unsubsidized) in 2016. Neither of these include any Parent Plus loans. The servicer recommended this when I mentioned on a call that I was working to improve my credit. They suggested that consolidating my loans would help my credit. This turned out to be complete nonsense and I didn’t realize the implications of it at all, just took their recommendation at face value. They didn’t explain that there were any of the possible future downsides, didn’t disclose it could reset my clock or that it would, in fact, increase my interest, something I had specifically asked and they said wouldn’t change. Now I’m afraid that I reset my forgiveness clock to 2016 when my original clock had started in 2004. The latest aid effort would have taken effect for me in 2024, but if my clock was reset to 2016, that would exempt me from the latest student debt forgiveness until 2036 (at which point there’s likely to be a different administration and different mindset about student debt relief altogether).

    On top of that, the servicer that consolidated my loans (MyFedLoan) has now sold them and transferred them to a new servicer (Nelnet) and I can’t see any historical data on my loans from before they were transferred. It seems that none of that history was included in the transfer which seems like a huge failure.

    I can’t seem to get any definite confirmation, however, as to whether my loan clock did in fact get reset. I’ve tried to reach out to my new servicer with no response from them, and all of my research just says that consolidating “might” have reset my clock. Is this a universal thing or are there scenarios where it doesn’t reset? If it did reset my clock, is there anything I can do to somehow still benefit from the new student loan forgiveness happening now?

  4. Hi Michael, Thank you for this. Are you able to recommend how to find someone to talk to, like you, that I can hire to sit down with me and my paperwork and help me figure out all my options and come up with a good plan? I want to make sure I don’t mess anything up. Thank you.

  5. I have 3 FFEL loans ranging from $4,000-$13,000, but each originated under $12,000. The SAVE plan touts ten year forgiveness on a IDR for loans originating at $12,000 or less. If I consolidate my 3 FFEL loans into direct loans in order to qualify for SAVE, will I still be eligible for 10 year forgiveness? Do I need to consolidate each of the three loans separately to preserve their original disbursement amounts?
    I called my loan servicer to ask how close I am to 20 year forgiveness on my current payment plan. The loans were disbursed in 2008. They said my anticipated pay off date is 2043. I am so confused.
    I have $257,500 total student loans with $1,250 in interest accruing monthly. SOS.

      • Actually, I spoke directly with a rep at MOHELA who also ran it up the chain to their manager (all of which is now permanently documented on that call) that the rule is per loan. So for example all my loans have an original principal balance of $12k or less and all qualify. They all have separate interest rates and were disbursed out on separate dates (and separate years). They have separate total monthly payment counts, etc. They are separate loans and would be treated as such. I asked again to be sure and they confirmed again.

      • I appreciate you taking the time to comment and share your experience. I also think that it was really smart of you to get a confirmation from management and have it documented on your account.

        Unfortuantely, I’m afraid the information MOHELA provided you was not accurate. I’ve gotten this quesiton from many readers, and it seems even servciers don’t understand the $12,000 forgiveness provision. I’m in the process of preparing an article explaining exactly how the rule works, and it should post to this site within the next 24 hours.

        For now, I’ll tell you that the Code of Federal Regulations is very clear on this issue. 34 C.F.R. § 685.209(k)(3) specifically states that the $12,000 forgiveness after ten years is based on “the borrower’s total original principal balance on all loans.”

        I hope I’m wrong and the call reps you spoke to were right, but I’d encourage you not to assume your debt will get forgiven after 10 years if the total original principal balance is greater than $12,000.

  6. This past Friday I received the email that my IBR loans have qualified for forgiveness. First, I thought it was spam, but then I realized after I read a few articles about the one time adjustment that it was for real. For one moment I felt a glimmer of hope to not be burdened by this ungodly weight of debt. My loan stands at 387,000 almost all interest. I’ve been paying for years but like many people I was given bad guidance by the loan servicers and the debt blew out of control. I live in a state that will consider it income and charge 5% taxes with a 10% payment penalty and interest and require the taxed amount to be paid within 2 years. This is a LOT of money that I don’t have. Now I can opt out of the forgiveness, but no one can tell me if that means. Would that mean I’m no longer eligible for forgiveness, that the counter starts back to zero? When will the loans be forgiven. Nothing, I’ve call my loan servicer, the federal office of student aid, and I’m at a loss. If I knew my loans would be forgiven in 2024, I would move this weekend to a state where I would not have to pay state and county taxes. How am I supposed to make a good decision by Aug. 11 2023 (the deadline to opt out) if no one knows what happens next or how a decision to opt out will impact my future options. I did work in Non-profit and Government for over nine years but I can’t even find out before the deadline for opting out, how many months of qualified payments I have for Public Service Forgiveness remaining to see if that might be a viable option. Where do I go? Who do I ask? This is information I need to make an informed decision. I’ve done all the research, I know what states have reciprocal agreements with my current state so I don’t have to change my job. I understand the payment options for the TAX bomb, I just need to know how opting out works and its impact on my options for forgiveness in the future. Can you help?

    • Wow. I can see why this is a stressful and confusing situation. Getting loan forgiveness sounds great, but if you can’t afford forgiveness due to state taxes, it suddenly doesn’t look so good.

      I’ll first answer your question about opting out: I don’t know off the top of my head. This is something I’m going to have to investigate first.

      However, I wanted to get a response posted right away because I think you should look into talking to a tax professional in your area. Find a local accountant with some real expertise. There may be exceptions to the rule in your state, for example, if the tax bill would cause insolvency. Individual state tax laws are miles outside of my expertise, but it is worth tracking down someone who can offer some guidance.

  7. Someone on FB posted a screenshot of his consolidation in process. In that screenshot, there was a notice in clause J stating that “any payments made on the loans that I am consolidating before the date of consolidation will not count toward the number of years of qualifying repayment for PSLF, etc.”. Huh!

  8. I have been in the public loan forgiveness program and have 16 more payments left to forgiveness on my under grad loans. I have 115 payments left on my graduate loans. My loan servicer said if I consolidate before Oct 31st 2022 I would not lose the credit for the 109 payments already made and all my loans would be forgiven after the 16 payments I have left. This is not what the application says and my servicer will not put this in writing. Is this written anywhere?

    • I wish I had something definitive for you. But what you are being told sounds accurate in terms of the limited waiver. If it is, that is a huge break for you.

      As far as definitive language, here is what the Department of Education says in the PSLF Limited Waiver FAQ:

      “Assuming your repayment history overlaps for each loan, the consolidation loan will be credited with the largest number of payments of the loans that were consolidated. For example, if you had 50 qualifying payments on one Subsidized Stafford Loan and 100 qualifying payments on another Subsidized Stafford Loan and you consolidate those loans, you will receive 100 qualifying payments on the new Direct Consolidation Loan.

      If your repayment history does not overlap for each loan, the consolidation loan may be credited with more total payments than the loan with the largest number of payments.”

  9. What are the situations where consolidation doesn’t restart the clock? You had mentioned that starting the clock over was “a general rule?

    • Hi Toby – I’m not aware of any exceptions to the general rule. That phrasing had more to do with the fact that I know of many borrowers who consolidated and then had to restart the path towards forgiveness. I’d like to see the Department of Education policy change on this particular rule. The fix could look something like Temporary Expanded Public Service Loan Forgiveness, where borrowers who were on the wrong repayment plan were able to count that time towards forgiveness.

    • They track it by the month, so the goal is tallying 120 months.

      Once you start working for a PSLF employer, it is best to send in an employer certification form to make sure everything is in order. That is the best way to verify that the clock has started.


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