Home » Repayment » Student Loan Forgiveness » Federal Consolidation and the Student Loan Forgiveness Clock

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.


Affiliate Disclosure and Integrity Pledge

When student loan repayment resumes in the fall of 2023, the rules on student loan consolidation and the loan forgiveness clock are going to look a lot different. The news is mostly positive for borrowers purusing Public Service Loan Forgivness (PSLF) and IDR forgiveness.

It isn’t the biggest change coming to student loans, but it’s significant nonetheless.

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 December 31, 2023. 

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 December 31, 2023, 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 beneift 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 December 31, 2023 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 that wish to do the math on their own loans, the government uses the weighted average of progress.

A Possible Reset in Early 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 the first half of 2024 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.

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

  1. 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?

  2. 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.

  3. 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.

  4. 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.

  5. 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!

  6. 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.”

  7. 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.


Leave a Comment