On April 19, 2022, the Department of Education announced a temporary program to update the IDR payment counts for many federal student loan borrowers.
The exact details, explained below, are a bit complicated. As a result, this monumental change might be missed by some borrowers.
What is so significant about the change?
Millions of federal borrowers just got closer to student loan forgiveness. The Department of Education estimates that 40,000 will receive forgiveness.
Updating IDR Payment Counts Fixes a Major Issue
To understand how the changes apply to your student loans, it is helpful to know why the changes were made.
Income-driven repayment plans like IBR, PAYE, and REPAYE help borrowers afford their monthly student loan payments, even if they have a large balance. Crucially, these plans also provide a path to debt freedom. Borrowers on IDR plans can have their debt forgiven after 20 or 25 years, depending on the plan.
The first income-driven repayment option was created in 1994. To this day, the representatives at many student loan call centers don’t fully understand how IDR works and how it can help borrowers. As a result, many borrowers have been given bad advice from their servicer over the past 30 years.
Some borrowers were placed on a deferment or forbearance when an IDR plan would have been a better choice. Others were enrolled in extended or graduated repayment plans instead of an IDR plan. Unfortunate advice like this caused borrowers to delay or completely miss out on student loan forgiveness.
Forbearances, Deferments, Extended, and Graduated Repayment
During this one-time update of borrower IDR count, many previously ineligible repayment plans and payment statuses will now get borrowers closer to the required 20 or 25 years worth of IDR payments.
Deferments — Previous periods of borrower deferments will get credit as IDR repayment time. The one exception is in-school deferments, as outlined below.
Forbearances — If a borrower has 12 consecutive months of forbearance, or a total of 36 months of forbearances, the borrower receives credit for IDR payments during this period.
All Repayment Plans — Borrowers who were “In Repayment” get credit as time towards IDR forgiveness, regardless of the repayment plan they were on.
Activity Before Consolidation — Historically, consolidating your loans meant “restarting the forgiveness clock.” Under the new policy, this time will get added as progress towards IDR forgiveness.
Important Note: The rules for IDR forgiveness have not changed. Instead, borrowers receive a one-time credit for previous periods that were not eligible.
Borrowers still need to enroll in an IDR plan if they want to earn additional progress toward loan forgiveness.
What Doesn’t Count Under the Updated Rules?
Most borrowers are likely to see their tally towards IDR forgiveness jump considerably.
However, a few exceptions will limit the benefit to some borrowers.
In-School Deferments — If you were on an in-school deferment, you will not receive credit for this time. Even if you made payments during school, the time does not count.
Grace Period — All borrowers receive a six-month grace period after finishing school before payments start. This time will not count towards IDR forgiveness.
FFEL Loans — The most significant exception is that borrowers with FFEL loans will not benefit from this program. However, it is possible to work around this issue. (see the next section)
Steps Borrowers Must Take
The good news for borrowers is that these updates happen automatically.
The one exception is commercially-held FFEL loans. If you have an FFEL loan, or a privately held Perkins or HEAL Loan, you should consolidate by December 31, 2023, which is the date the Department of Education expects to start updating the borrower counts.
Many borrowers delayed consolidating for fear of losing progress towards forgiveness. The new policy temporarily allows FFEL borrowers to consolidate without starting from the beginning. Better yet, it’s also a great opportunity for FFEL borrowers who are chasing PSLF.
IDR Count Adjustment Timeline
The Department of Education expects to complete the update of the IDR payment records at some point in 2024 for most borrowers.
However, it is worth noting that this update has already been pushed back multiple times from the originally planned date in January 2023, and it is possible that further delays will happen.
The one exception to this timeline is for borrowers who are nearing the number of payments required for IDR forgiveness. These borrowers should receive their update and details on forgiveness by the spring of 2023 according to the Department of Education. If you think you have already reached the 20 or 25 years necessary to earn IDR forgiveness under these new rules, now is the time to reach out to your servicer.
Timeline Adjustments: The multiple delays on this update are undoubtedly frustrating for borrowers, and this appears to be a lower-priority item from the Department of Education.
If there is good news in this situation, it is that the update may happen after the federal student loan repayment restart. This may increase the number of borrowers who research this issue and benefit from the program.
How to Find Your Payment Status History
Payment histories are notoriously difficult to track down. Loans often move from one servicer to another. Information sometimes gets lost in the transition.
Fortunately, studentaid.gov has records of your payment status history. To find these records:
- Log in to studentaid.gov.
- In the My Aid section of the dashboard, click on View Details.
- Next, scroll down to the loan breakdown at the bottom of the page.
- Click on the View Loans dropdown.
- This will pull up a list of your student loans.
- Select View Loan Details for the loan that you want to review.
- In the top section, there is a link for Loan Status History.
The loan status history should show periods of repayment, deferments, and forbearances.