One of the Biden administration’s most significant and successful student loan forgiveness initiatives is winding down, and is expected to conclude by the end of August.
The IDR Account Adjustment is a landmark program designed to rectify past problems with income-driven repayment plans. IDR plans allow borrowers to make payments based on their income and family size, with any remaining balance eventually forgiven, typically after either 20 or 25 years. But complex rules, poor loan servicing, and inadequate oversight resulted in many borrowers being steered away from IDR plans and instead placed into costly forbearances, while poor record-keeping practices prevented others from getting the loan forgiveness credit that they were entitled to under law.
The account adjustment is a one-time program intended to address these longstanding issues. Under the program, borrowers can receive credit for past loan periods that may not have counted toward IDR loan forgiveness, such as certain deferment and forbearance periods and time spent in repayment under other plans. Periods prior to loan consolidation can also count under the adjustment, which is a significant benefit given the prior practice of consolidation erasing a borrower’s IDR credit. Borrowers on track for Public Service Loan Forgiveness, or PSLF, can also benefit from the account adjustment.
More than a million borrowers have already received student loan forgiveness under the program, according to the Education Department. But as Biden administration officials expect to complete implementation in just a matter of days, uncertainty clouds the initiative. It remains somewhat unclear when remaining borrowers will see all of the benefits of the account adjustment. And legal challenges impacting several IDR plans could interfere with — or even block — loan forgiveness for millions borrowers.
How Student Loan Forgiveness Works Under IDR Account Adjustment
“If you’re on an IDR plan or working toward PSLF, your remaining loan balance gets forgiven after you make the required number of payments,” explains the Education Department in guidance published about the IDR Account Adjustment. “In the past, there were a variety of reasons why some months may not have been credited toward loan forgiveness—for example, months when you were in a payment plan that wasn’t eligible. With this payment count adjustment, we will change whether certain payments or months are credited toward your loan forgiveness.”
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The account adjustment will benefit borrowers in different ways, depending on where the retroactive IDR credit leaves them:
- Borrowers who receive enough IDR credit to reach the 20- or 25-year mark for student loan forgiveness (depending on whether or not they took out any graduate school loans) will get their balances forgiven. Already, more than a million borrowers have qualified for loan forgiveness under the program.
- Those who receive more than enough IDR credit to qualify for loan forgiveness would not only receive a discharge of their debt, but they could also potentially receive a refund of some excess payments, in certain circ*mstances.
- Borrowers who don’t quite get enough IDR credit to qualify for immediate loan forgiveness would get to retain their credit, and would advance their progress toward an eventual discharge, but would need to switch to an IDR plan (or continue making payments under an IDR plan if already enrolled) to continue marching toward their loan forgiveness milestone.
Direct federal student loans, and certain FFEL-program loans held by the Education Department, qualify for relief under the IDR Account Adjustment automatically. Other borrowers, such as those with commercially-owned FFEL loans, must have applied to consolidate their loans via the Direct consolidation program by June 30, 2024 in order to be eligible.
Biden Administration Expects To Complete Initiative By September 1
According to the latest Education Department guidance, the Biden administration is still on track to complete the initiative within a matter of days.
“The U.S. Department of Education (ED) currently expects that the payment count adjustment will be completed by Sept. 1, 2024,” says the department on StudentAid.gov. “When we implement the adjustment, it will automatically be applied to all Direct Loans and FFEL Program loans that are managed by ED at that time. This includes Direct Consolidation Loans that repaid a privately held Perkins or FFEL Program loan and that are disbursed before the adjustment occurs.”
The administration pushed back the implementation date of the IDR Account Adjustment several times. Initially, the department expected completion by January 1, 2024, then July 1. The September 1 date represents the latest change in that timeline.
Borrowers who receive enough IDR or PSLF credit to qualify for loan forgiveness would receive a discharge. For other borrowers, the Education Department is expected to publish progress reports containing IDR payment counts — similar to PSLF Tracking — letting borrowers know how far they are into their repayment term, and their projected student loan forgiveness date.
Exact Timeline For Student Loan Forgiveness And Other Benefits Are Unclear
While the Education Department has maintained its anticipated September 1 completion date, it’s unlikely that borrowers who qualify for the IDR Account Adjustment’s benefits will see immediate relief on that date.
For borrowers who qualify for student loan forgiveness as a result of the IDR Account Adjustment, either through IDR or PSLF, the actual discharge process can sometimes take several months, with borrowers first given an opportunity to opt out of relief after receiving the initial notice that they qualify. Those who are eligible for refunds of past payments may need to wait longer.
And the department has been silent about when other borrowers will see their IDR payment counts published on their StudentAid.gov dashboards. Even if the IDR Account Adjustment is still on track to be completed by late August or early September, borrowers may not be able to view their IDR payment counts until sometime well after that, possibly toward the end of the year.
Legal Challenges Cloud Student Loan Forgiveness Benefits Of Account Adjustment
Meanwhile, ongoing legal challenges are threatening to interfere with the student loan forgiveness benefits of the IDR Account Adjustment.
Earlier this month, a conservative panel on a federal appeals court issued an injunction blocking the SAVE plan, an IDR plan established by the Biden administration last year. Eight million borrowers who enrolled in SAVE have now been placed into a forbearance, which doesn’t count toward IDR loan forgiveness.
But the scope of the injunction has particularly concerned Biden administration officials, as it seems to go far beyond just the SAVE plan itself. The order appears to prohibit any student loan forgiveness for borrowers enrolled in SAVE, even under other programs that are unrelated to SAVE (such as PSLF). And the order also suggests that student loan forgiveness under other IDR plans, like Income-Contingent Repayment or Pay As You Earn, should be halted, as well. All of this could potentially interfere with relief under the IDR Account Adjustment.
The Biden administration filed a request for clarification with the court to address the scope of the injunction. But on Monday, the court rejected that request, without providing any explanation. Attorneys for the administration have now appealed to the U.S. Supreme Court.
