Who qualifies for student loan relief under Biden’s huge new income-based repayment expansion

Yesterday, the Biden administration announced a sweeping new initiative to expand income-contingent reimbursement programs. This effort will significantly expand the pool of borrowers eligible for student loan forgiveness.

According to the Department of Education, at least 40,000 student borrowers will receive immediate and automatic student loan forgiveness. And another 3.6 million borrowers will accelerate their progress toward eliminating student loans altogether.

As with many federal student loan relief programs, the new initiative is somewhat complicated. Here’s who qualifies and what borrowers need to do.

Key elements of Biden’s new student loan forgiveness initiative through income-based repayment

Income-Based Repayment (IDR) describes a set of plans – which include Income-Based Repayment (IBR), Pay As You Earn (PAYE) and others – that tie a borrower’s monthly payment to their revenue. After 20 or 25 years of payments (depending on the plan), any remaining balance is canceled, although this could potentially be treated as taxable income for the borrower depending on when the cancellation actually occurs. According to the original IDR rules, only time spent on repayment under specific IDR plans can count towards student loan forgiveness.

IDR plans are also a mandatory component of the Public Service Loan Forgiveness Program (PSLF), which can eliminate a borrower’s federal student loan debt in as little as 10 years if they devote their career to work. nonprofit or government. However, the Biden administration recently announced a temporary initiative called the Limited PSLF Waiver which, for a limited time, expands the type of repayment plans eligible for the PSLF.

As part of new changes to the IDR announced this week, the Biden administration will significantly expand eligibility for student loan forgiveness under the IDR:

• The Department of Education will make a one-time adjustment to borrowers’ accounts to allow all prior repayment periods, including repayments under non-IDR plans, to count toward the loan waiver period. 20 or 25 year IDR loan from a borrower.
• The Department of Education will make a one-time adjustment to borrowers’ accounts to allow past forbearance periods of 12 or more consecutive months, or 36 months of cumulative forbearance, to count toward the cancellation term. of a borrower’s 20 or 25 year IDR loan.
• The Department of Education will make a one-time adjustment to borrowers’ accounts to allow past deferment periods (excluding school deferments) prior to 2013 to count toward the IDR loan forgiveness period of 20 or 25 years of a borrower.

As part of this initiative, the Ministry of Education will also be able to count payments made before loan consolidation – a huge benefit for borrowers, given that under the original IDR rules, the Consolidation restarts the clock on a borrower’s repayment term.

The Department will implement many of these changes automatically. And in many cases, borrowers won’t have to take any action to receive relief. But in some cases they will.

Borrowers Eligible for Immediate and Automatic Student Loan Forgiveness Under IDR Changes

According to the Department of Education, 40,000 or more borrowers may be eligible for immediate (or near-immediate) automatic student loan forgiveness under this initiative. “Any borrower whose loans have accrued a repayment term of at least 20 or 25 years will receive automatic forgiveness, even if you are not currently on an IDR plan,” the Department of Education says in statements. guidance released this week.

Borrowers who are not eligible for immediate and automatic student loan forgiveness through the IDR changes may nonetheless see their progress toward loan forgiveness progress significantly as a result of the changes, bringing them ever closer to cancellation of their student loans. The Ministry of Education has indicated that it will start publishing IDR payment tally and progress reports for borrowers by next year.

Borrowers Eligible for Immediate Student Loan Forgiveness through PSLF Following IDR Changes

Thousands of borrowers are also eligible for immediate student loan forgiveness through the Public Service Loan Forgiveness Program (PSLF) under the new IDR changes if, for example, past forbearance periods counted under this new IDR initiative pushes them beyond the 120 payment threshold required for PSLF relief.

“If you have 12 or more months of consecutive abstention or 36 or more months of cumulative abstention, you will receive PSLF credit for those periods if you certify qualifying employment,” the Department of Education said in a published guidance. this week. This relief will be granted automatically. However, borrowers who have not certified their employment for these periods should do so. You can start with the Ministry of Education Online PSLF Help Tool.

Borrowers should also learn more about the requirements of the new Limited PSLF waiver for more details. While the limited PSLF waiver did not include a forbearance waiver, the new IDR amendments do.

Borrowers with shorter forbearance periods may need to submit a dispute

While the Department of Education will automatically count past abstention periods of 12 consecutive months or more, as well as 36 cumulative abstention months, shorter abstention periods fall into a bit of a gray area.

According to the Department, borrowers who wish to have shorter past forbearance periods count towards their IDR repayment term may need to submit a formal dispute to the Department’s department. FSA Ombudsman and successfully argue that they were improperly steered towards forbearance during this period, rather than an IDR plan. FSA officials will make decisions on a case-by-case basis.

FFEL borrowers may need to consolidate

While borrowers with loans from the FFEL (Commercially Issued and Government Supported Federal Student Loans) program can benefit from the IDR reforms, the Ministry of Education said these borrowers should first consolidate their loans through the Federal Direct Consolidation Loans Program. . “If you have FFEL loans held for business purposes, you can only benefit from the IDR account adjustment if you consolidate before we finish implementing these changes, which is estimated no earlier than January 1, 2023. “, said the Department.

Normally, consolidation erases any progress toward a borrower’s repayment term and restarts the clock on payments eligible for loan forgiveness. But under the IDR changes, “any repayment time before consolidation of consolidated loans” will count, the Department explains.

Further Reading on Student Loans

Biden administration announces sweeping fixes to income-based repayment and student loan forgiveness programs

Will student loan repayments really resume? Probably Not For A While – Here’s Why

Forgiveness of student loans through executive action still on the table, says top Biden official

4 options for Biden to legally enact student loan forgiveness without Congress