If you missed the deadline for the Limited Waiver on PSLF, there is still time to take advantage of many of the best perks.
Another temporary program, the Income-Driven Repayment Account Adjustment, is still alive. Within the fine print of the IDR Count update, PSLF borrowers can find considerable help.
What was the Limited Waiver?
Broadly speaking, the Limited Waiver was created to fix many problems plaguing the PSLF program.
Many borrowers had ineligible loans or enrolled in the wrong repayment plan. Worse yet, at times, servicers mistakenly told these borrowers they were on track to earn Public Service Loan Forgiveness.
The Limited Waiver allowed PSLF borrowers to increase their certified payment history and potentially earn forgiveness. It even helped borrowers with dreaded FFEL loans consolidate their debt without losing progress toward forgiveness.
Sadly, the Limited Waiver program expired on October 31, 2022. It was not extended or renewed.
IDR Account Adjustment Basics
The IDR Account Adjustment was created to help a larger group of federal student loan borrowers.
Here again, it is a temporary program created to correct errors of the past. In this case, servicers advised many borrowers to use a deferment or forbearance when they would have been better off if they had signed up for an IDR plan. Similarly, other borrowers were enrolled in a balance-based repayment plan, such as graduated or extended repayment, when they could have signed up for an IDR plan and made progress toward loan forgiveness.
The IDR Account Adjustment will review a borrower’s repayment history.
The following periods will now count toward IDR forgiveness progress:
- any months in a repayment status, regardless of the payments made, loan type, or repayment plan;
- 12 or more months of consecutive forbearance or 36 or more months of cumulative forbearance;
- months spent in economic hardship or military deferments after 2013;
- months spent in any deferment (with the exception of in-school deferment) prior to 2013; and
- any time in repayment on earlier loans prior to consolidation of those loans into a consolidation loan.
Note: this program is backward looking. Borrowers who are on a forbearance, deferment, or ineligible plan in the future will not earn progress toward IDR forgiveness.
What about the Covid-19 payment and interest freeze? Borrowers who did not have to make payments during the Covid-19 relief program will still receive credit towards IDR forgiveness for this time. Those working in a PSLF job can also receive credit towards PSLF forgiveness.
The One-Time IDR Account Adjustment for PSLF Borrowers
Things start to get interesting when we examine how the IDR Account Adjustment Applies to PSLF Borrowers.
Most notably, the Department of Education says that:
- If you have applied or will apply for PSLF, these changes may have an impact on you by increasing your qualifying payment count.
- If you have 12 or more months of consecutive forbearance or 36 or more months of cumulative forbearance, you will receive PSLF credit for those periods of time if you certify qualifying employment.
- These changes will be applied automatically to all PSLF-eligible Direct Loans, including consolidated and unconsolidated parent PLUS loans. If you believe you might benefit, you should update your employment certification history to reflect all periods of public service employment.
- Borrowers with commercially or federally held FFEL loans who consolidate those loans into Direct Consolidation Loans before the account adjustment is applied will also get PSLF credit.
I’ve bolded the essential detail for FFEL borrowers. Consolidation is still an option to get PSLF credit for loans that are otherwise not eligible for PSLF.
The critical requirement is that the account adjustment deadline doesn’t get missed.
The Account Adjustment Deadline
The IDR Account Adjustment deadline has already been moved a couple of times. Fortunately for borrowers, the deadline keeps getting pushed back.
The Department of Education expects to complete the update in early 2024.
Next Steps for Borrowers
Consolidating FFEL Loans is a big decision. It is also something that cannot be undone once it is finalized.
Thus, it’s a good idea to talk to your servicer to discuss your plans to ensure you are not missing something.
For borrowers interested in PSLF, there are two big steps:
- Document that you work for a PSLF-eligible employer.
- Consolidate long before the December 31, 2023, deadline.
The Department of Education requires borrowers to apply for consolidation before the end of 2023. However, consolidation is a process that can take weeks to finalize, and if you wait until the last second, you increase the odds of having glitches or errors to resolve.
Consolidation Risks for FFEL Borrowers
In most cases, consolidating before the end of 2023 will be the smart move for FFEL borrowers.
However, there are a couple of potential landmines to watch:
First, some FFEL borrowers have FFEL consolidation loans. These FFEL consolidation loans sometimes have premium interest rates attached to the loan. If the borrower consolidates into a federal direct loan, the interest rate reverts back to the original rate. However, if you get your loans forgiven via PSLF, the interest rate doesn’t really matter. Sadly, not all borrowers will earn PSLF forgiveness. If you end up having to pay off the loans in full, you might want to stick with your premium interest rate.
Second, at this time, we have no idea what is happening with the one-time forgiveness program of up to $20,000 per borrower. We don’t know how the Supreme Court will rule, and we don’t know how the ruling might impact FFEL borrowers. Thus, it is impossible to say how consolidating now might affect the one-time forgiveness program.
This likely represents the last chance for FFEL borrowers to consolidate their loans without losing progress toward IDR forgiveness or PSLF.
Making sense of the temporary rules and understanding these programs isn’t easy. However, they are an incredible opportunity to get massive amounts of debt forgiven.
Investigating your options is almost certainly time well spent.