President Biden emailed more than 800,000 borrowers this week, congratulating them on student loan forgiveness and inviting them to share their story.
“Congratulations – your student loan has been forgiven because of the actions my administration took to make sure you get the relief you’ve earned and deserve,” reads the email, which is titled “A Message from President Biden.”
Here’s what borrowers need to know
Over $40 billion in student loan forgiveness under adjustment
The student loan forgiveness mentioned in Biden’s email was provided through the IDR Account Adjustment initiative. This one-time program was implemented to address long-standing problems with income-based repayment plans, including poor record-keeping and lax administration. In many cases, borrowers faced significant accrued interest and principal while adding many years to their repayment terms as a result of poor management and oversight of IDR programs.
Account adjustment allows the Department of Education to credit borrowers with time toward 20- or 25-year student loan forgiveness terms under IDR programs that historically would not count. Borrowers can get relief even if they are not enrolled in IDR. Under the adjustment initiative, past repayment periods under any program, as well as multiple deferral and forbearance periods, may count toward the borrower’s IDR loan write-off term.
Borrowers who receive enough IDR credit to reach the appropriate milestone for loan forgiveness receive a waiver. So far, at least 850,000 borrowers have been approved for more than $40 billion in student loan forgiveness under the adjustment.
“For far too long, the student loan program has failed to live up to its commitments — and millions like you never got the relief you were owed because of mistakes and administrative failures,” Biden said in the email sent to borrowers. “I vowed to fix this and I’m proud that my government kept that promise. I hope this relief gives you a little more breathing room.” Biden continues to encourage borrowers to share their story.
Student loan forgiveness continues under account adjustment
IDR Account Adjustment is ongoing and more relief may be coming.
The Biden administration initially focused on providing relief to borrowers who work in public service jobs. Account adjustment can allow borrowers to receive a Public Service Loan Forgiveness credit (in addition to the IDR credit) and works as an extension of many of the benefits associated with Limited PSLF Relief, which ended last fall. More than 600,000 additional borrowers have received student loan forgiveness through PSLF, according to the Department of Education. Borrowers who have submitted PSLF employment certifications “will see their PSLF payment number updated each month until we make the final adjustment to their IDR number in 2024,” according to the Department of Education Directive.
The department then began implementing the adjustment for individuals who reached the 20- and 25-year IDR student loan writing milestones as a result of the credit they received. The department “will continue to identify and notify borrowers who reach the necessary 240- or 300-month forgiveness threshold for payments, depending on the repayment plan and loan type,” the published guidance states. “We will send these notices every two months until next year, so all borrowers who are not yet eligible for forgiveness will have their payment metrics updated.”
The administration is expected to complete IDR account adjustment in 2024. Borrowers who receive an IDR and PSLF credit, but who do not meet the thresholds for student loan forgiveness, will have to continue repaying their loans under an IDR program (such as new SAVE plan) to make continued progress towards debt relief.
Conservative legal groups filed a lawsuit last summer to try to block implementation of the IDR bill adjustment, arguing the program is illegal. A Michigan federal court dismissed the suit for lack of standing in August. However, the challengers appealed and that appeal is still pending.
An important deadline for student loan forgiveness is approaching
For borrowers who already have state federal student loans — including all Direct Loan borrowers — relief will be automatic as part of the IDR account adjustment.
However, some borrowers will need to apply to consolidate their loans through the federal direct consolidation program before December 31, 2023 in order to qualify. “If you have commercial FFELs or Perkins or HEAL loans, you will need to consolidate them before the end of 2023 to take advantage of the account adjustment,” the Department of Education guidance states.
In addition, borrowers who have federal student loans with different repayment histories can also benefit from instant loan consolidation. According to the IDR Account Adjustment, “Assuming your repayment history overlaps for each loan, the consolidation loan will be credited with the longest period of time to repay the consolidated loans,” the department says. These borrowers should also consolidate before the end of the year to maximize these benefits.
“If you file for consolidation before the end of 2023, the adjustment will count your pre-consolidation loan repayment periods toward IDR and (for eligible borrowers) PSLF write-off,” the official program guidance states. “This differs from the previous approach, where consolidating your Direct Loans would reduce your number of payments to zero. After the IDR adjustment is applied to all borrower accounts in 2024, the accounts will be treated according to the regulations in effect at that time.”
Further reading on student loan forgiveness
New Application for Student Loan Forgiveness Borrowers with Medical Issues
5 Student Loan Forgiveness Mistakes to Avoid, According to an Attorney
Didn’t receive a student loan forgiveness email? 7 possible reasons
These updates to student loan forgiveness will affect 9 million borrowers or more