Borrowers Have More Time to Consolidate Loans to Benefit from the Adjustment
By: Federal Student Aid Chief Operating Officer Richard Cordray
Since this summer, the U.S. Department of Education (Department) has approved almost $44 billion in debt relief for more than 900,000 borrowers as part of the payment count adjustment. This is a one-time initiative to address historical failures in administering student loans. It provides much-needed relief to borrowers who have been in repayment for 20 years or more and gives all other borrowers an accurate picture of their progress toward forgiveness going forward. The payment count adjustment is one of several actions that has brought overall forgiveness approved by the Biden-Harris Administration to $132 billion for over 3.6 million borrowers.
And we’re not done. We will continue identifying borrowers eligible for forgiveness regularly so they don’t have to wait to get relief. Any extra payments will be refunded. For everyone else, we expect to complete the full adjustment by July 1, 2024. That means all borrowers with Direct or Federal Family Education Loan (FFEL) Program loans held by the Department will see their progress toward forgiveness update automatically after that point. Borrowers with loans not currently held by the Department, such as those with commercially held FFEL or Perkins loans, can get the benefit of the adjustment by applying to consolidate by April 30, 2024. Most consolidation loans are disbursed within 60 days, but some take longer, so we encourage borrowers to apply as soon as possible. In the meantime, here are a few important things borrowers should know about the adjustment.
1. The payment count adjustment is automatic for Direct or federally managed FFEL loans—no application required.
The payment count adjustment automatically updates the accounts of borrowers with federally managed loans. It provides credit toward income-driven repayment (IDR) forgiveness and Public Service Loan Forgiveness (PSLF) for any time in repayment status, certain periods of forbearance and deferment, and time in repayment prior to consolidation on consolidated loans. Because it is automatic, most borrowers don’t need to do anything to get their accounts updated. We are reviewing every Direct and FFEL loan held by the Department and are working with our loan servicers to update borrower accounts. Borrowers do not need to apply for the account adjustment, but some borrowers might benefit from consolidating their outstanding federal student loans. For more information about who can benefit from consolidation, see item #4 below.
2. We’re identifying borrowers who are eligible for forgiveness at least every two months so they can get their relief without waiting for us to finish the adjustment.
To get relief to borrowers faster, we are ensuring that anyone with enough credit toward forgiveness does not have to wait until we process the full payment count adjustment. We began identifying borrowers with loans that meet the forgiveness thresholds in July. The Department will continue to identify eligible loans every two months to capture new borrowers and loans that reach the forgiveness threshold. Borrowers are eligible for forgiveness regardless of whether they are currently enrolled in an IDR plan or not. For borrowers seeking PSLF, we’re identifying those eligible for forgiveness each month.
Some borrowers have multiple loans that will reach the forgiveness threshold at different times because the loans did not enter repayment at the same time or are not the same loan type. In these cases, borrowers may have one or more of their loans forgiven, but still have a balance on StudentAid.gov and on their servicer’s website. Borrowers in this situation can choose to opt out of loan forgiveness on the eligible loan and then consolidate all loans into a Direct Consolidation loan. If borrowers have different loan types, such as some undergraduate loans and some graduate loans, consolidation could extend the time to forgiveness for the previously eligible loans. Borrowers should carefully review the thresholds on the payment count adjustment page. Borrowers should continue making payments on any remaining loans.
3. Most borrowers who haven’t reached forgiveness yet will receive an updated payment count when we finish the full payment count adjustment in July 2024, but it may take some time after that for their progress to show up on their servicer’s website and on StudentAid.gov.
This fall, we started updating payment counts for Direct Loan borrowers with at least one approved PSLF form. We anticipate that the payment count adjustment for all other borrowers with loans not yet eligible for forgiveness will be completed by July 1, 2024. It may take several weeks for servicers to update their systems after the adjustment. Until the adjustment is fully implemented, most borrowers will not be able to get a count of their IDR progress toward forgiveness from their servicers. The Department is working on updates to allow borrowers to be able to track their progress toward IDR forgiveness on their StudentAid.gov dashboard, similar to the experience of PSLF borrowers today. We expect this tool to be available by the end of 2024.
4. Borrowers with commercially managed FFEL or Perkins loans should apply to consolidate as soon as possible—but no later than April 30, 2024—to get the full benefits of the adjustment.
The payment count adjustment will apply to all borrowers with federally managed FFEL or Direct loans at the time we complete the adjustment.
- Borrowers with commercially managed FFEL or Perkins loans can consolidate into the Direct Loan program and get the benefit of the payment count adjustment.
- Only Direct Loans are eligible for PSLF. Borrowers with federally managed or commercially managed FFEL or Perkins loans seeking PSLF can consolidate into the Direct Loan program and receive credit for PSLF.
Because consolidation typically takes at least 60 days, we encourage borrowers to submit a consolidation application as soon as possible—but no later than April 30, 2024—to ensure their consolidation loan is disbursed prior to the adjustment. Borrowers with Direct Consolidation loans are also able to take advantage of affordable repayment plans, such as the new Saving on a Valuable Education (SAVE) Plan.
Borrowers who aren’t sure what kind of loans they have can find out by logging in to StudentAid.gov. On their dashboard, they can click the “Loan Breakdown” section to view a list of their loans. Direct Loans begin with the word “Direct.” Federal Family Education Loan Program loans begin with “FFEL.” Perkins Loans include the word “Perkins” in the name. If the name of your servicer starts with “Dept. of Ed” or “Default Management Collection System,” your FFEL or Perkins loan is federally managed (i.e., held by the Department).
5. Borrowers with Parent PLUS loans are eligible for the payment count adjustment.
Parent PLUS loans that are federally managed are eligible for forgiveness if they have been in repayment for at least 25 years. Borrowers with Parent PLUS loans will also receive credit for any time considered eligible under the adjustment toward PSLF if the borrower certifies qualifying employment. Parent PLUS borrowers who are not yet eligible for forgiveness will need to consolidate their loans by April 30, 2024, to access the Income-Contingent Repayment (ICR) Plan and continue making progress toward IDR forgiveness. Parent PLUS borrowers can only access ICR by consolidating into the Direct Loan program.
6. Borrowers with defaulted loans can get the benefits of the payment count adjustment by getting out of default, including through Fresh Start or consolidation.
Fresh Start is a one-time pandemic-related opportunity that provides benefits for borrowers in default, including credit reporting benefits and access to affordable repayment plans and loan forgiveness programs. Defaulted borrowers have until September 30, 2024, to take advantage of Fresh Start. Defaulted borrowers, including FFEL and Perkins borrowers, can also consolidate to get out of default. Borrowers who use Fresh Start or consolidation to get out of default can get credit toward IDR and PSLF for months they were not in default. They can also get credit for months of the payment pause (between March 2020 and the month they exit default under Fresh Start). Learn more about the payment count adjustment for defaulted borrowers at StudentAid.gov/idradjustment. More information about Fresh Start is available at StudentAid.gov/freshstart.
7. Borrowers with joint consolidation loans can get the benefits of the payment count adjustment after they’re able to split their loans into a Direct Consolidation Loan.
Borrowers with joint consolidation loans managed by the Department are eligible for the adjustment and are being processed for forgiveness if the loans meet the threshold of 20 or 25 years’ worth of qualifying payments. Borrowers with FFEL joint consolidation loans that are commercially managed will have their payment count adjusted when they split their loan into a Direct Consolidation Loan, even if the split occurs after the adjustment is complete.
From Day One, the Biden-Harris Administration has prioritized supporting student borrowers and fixing the broken student loan system. The payment count adjustment is a critical piece of this effort. We will continue working to provide student loan borrowers with the relief they have earned and affordable pathways out of debt.
More details about the payment count adjustment is at StudentAid.gov/idradjustment.