How the IDR Waiver Really Works

With some of the Biden administration’s most ambitious plans for student loan forgiveness scuttled or unlikely to take effect soon, the Education Department is pulling harder on one still working lever.

The IDR Waiver gives borrowers loan forgiveness credits they’re owed for mismanagement by student loan servicers. The adjustment is known by many names, including the IDR One-Time Account Adjustment and the Payment Count Adjustment. No matter the name, the result is massive debt relief for borrowers steered into forbearance, deferment, and inferior repayment options instead of income-based repayment plans.

Although the Supreme Court scuttled some of President Biden’s broad-based student loan forgiveness plan for millions of Americans, the IDR Waiver works just fine. As of February 2024, the Biden Administration has wiped out over $138 billion in balances for over 3.9 million people, which is less than he originally set out to do but still a big win for borrowers. Let’s talk about how the IDR Waiver can help you in this evolving landscape.

Here are 3 key things you should know about this one-time account adjustment:

1. Extended Deadline: This program’s deadline for total loan forgiveness is now April 30, 2024. This extension is essential for those just discovering the program.

2. Automatic Adjustments: Starting July 1st, 2024, the Education Department will automatically update all borrowers’ accounts with Ed-held federal student loans, meaning no individual applications are necessary.

3. Broad Eligibility and Forgiveness: The program is open to private and public sector workers, including PSLF borrowers. It also includes various loan types, like commercially held FFEL loans, Perkins Loans, and HEAL Loans. It considers all repayment, forbearance, or deferment periods toward loan forgiveness.

This program also has a hidden benefit that few people know about:

If you combine your newer loans with your older ones, your entire loan balance can be forgiven immediately. This feature could provide significant relief for borrowers with multiple loans — especially those with Parent PLUS Loans.

This article focuses on the IDR Waiver, a recent change affecting federal student loans. If you’re looking for something else and you’re interested in how income-based repayment (IBR) forgiveness works, please visit our article on Income-Driven Repayment Plan Forgiveness.

 

Income Driven Repayment (IDR) plans, including IBR, PAYE, and REPAYE, adjust your loan payments based on your income and family size. Traditionally, these plans lead to loan forgiveness after 20 or 25 years of qualifying payments under an IDR Plan. This is known as “IDR Forgiveness.”

The IDR Waiver, or IDR Account Adjustment, accelerates this process.

It offers backdated credit toward income-based repayment forgiveness starting from July 1, 1994.

Why that date? It was when the first IDR Plan — the Income Driven Repayment Plan — became available.

The account adjustment will give you credit for 5 types of repayment statuses:

1. Any Payment Plan: Months you paid under any repayment plan, including the Standard, Extended, and Graduated Repayment Plans will apply towards your payment count.

2. Long Forbearances: If you had a break, or forbearance, from payments for 12 consecutive months or more.

3. Many short forbearances: If all your breaks add up to 36 months of cumulative forbearance, including the last three years of the payment pause.

4. New Deferments: Months after 2013 when you couldn’t pay due to economic hardship or military service.

5. Old Deferments: Months before 2013 when you had a break, except in-school deferment and grace periods.

• You need credit for 20 years of payments (or a 240-month payment count) if you only borrowed loans for undergrad.

• And you need credit for 25 years of payments (or a 300-month payment count) if you borrowed any amount of federal student loans for graduate school.

• You’ll need 25 years worth of payments for Parent PLUS Loans or consolidation loans that paid off parent loans.

Related: When Do Student Loans Go Away?

Yes. My team and I have helped hundreds of people from all walks of life get rid of their entire federal student loan debt using this IDR account adjustment program.

And many more have used the information we share on our website and in our newsletter to do the same on their own.

The U.S. Department of Education began implementing the IDR Waiver last year.

A significant feature of this waiver is its simplicity: eligible loans are audited automatically.

This means borrowers with Ed-owned Federal Family Education Loans or Direct Loans need not complete a separate application to benefit from the waiver.

Borrowers with older federal student loans may need to consolidate to direct loans to qualify for the IDR Waiver.

That’s because the adjustment will be applied only to loans owned by the Department of Education.

Confusingly, the department doesn’t own all federal student loans. Some loans are owned by schools, others by guaranty agencies like ECMC, and a handful are owned by agencies like the Department of Health and Human Services.

You must consolidate to qualify for the waiver if you have commercially held FFELP Loans, Perkins Loans, or Health Education Assistance Loans (HEAL).

You have until April 30, 2024, to submit your consolidation loan application. Consolidation can be done at no cost through the Federal Student Aid website, StudentAid.gov.

You can still get the benefits of the income driven payment count adjustment even if your loans are in default. And you can even get credit for the months when payments were paused. But you must get out of default first.

Two main ways to fix a defaulted loan are Fresh Start and consolidation.

• Fresh Start: This temporary program allows nearly all 8 million federal student loan borrowers in default to return to good standing without having to deal with cumbersome paperwork. You need to contact your loan holder, ask to apply for the Fresh Start Program, share information about your income, family size, and tax filing status, and agree to make monthly payments based on your income. The entire process takes me less than 10 minutes when I handle it for my clients.

• Consolidation: You can also consolidate your defaulted loans into a new loan. You can consolidate for free on the FSA website. The application process takes about 30 minutes to complete. From there, getting the new Direct Consolidation Loan takes another 6 to 8 weeks.

You can qualify for the payment count adjustment and the Public Service Loan Forgiveness Program if you have ever worked for a qualifying employer anytime after October 1, 2007. The waiver will give you Income Driven Repayment Credit and PSLF Credit.

But there’s one catch: To get your loans forgiven with PSLF, you must currently work for the government or a nonprofit.

Let’s picture this:

Say you worked for the government for ten years. Then, you moved to a private job during the pandemic. You hear about the IDR Account Adjustment. You combine loans into a Direct Consolidation Loan for more forgiveness credit.

The Department of Education then gives you 120 PSLF-eligible payments and 270 more for the IDR Program.

That’s a lot of help.

But, if you’re not working for the government or a nonprofit now, your loans can’t be forgiven with PSLF.

You must be in public service employment when you apply for PSLF.

After returning, send a new PSLF application to MOHELA. At that point, you’d be eligible for tax-free loan forgiveness.

How long do you need to work again? It’s unclear. It could be just one day, the day you apply.

Note: There’s a workaround to the public service employment rule if you qualify for the PSLF Waiver, which ended last Halloween.

Wondering how much credit you’ll get with the IDR Waiver? You don’t need to gather all your loan payment history. The waiver counts the months you were paying back or in forbearance or deferment. It doesn’t look at the actual payments.

There are two ways to figure out your time spent in the different repayment statuses:

• The Hard Way: You could download your TXT file from StudentAid.gov and count each month by yourself. This way is slow and frustrating.

• The Easy Way: My team and I created a unique tool that looks at your file and quickly estimates your credit. You’ll know how much credit you might get after the adjustment is added to your account.

Why Choose Our Tool? It’s free to use. Plus, we don’t sell or even store your information. We display the data for you. We built this tool to offer better advice to our clients, helping them understand their credit without the headache.

As promised, the Education Department has steadily adjusted borrowers’ accounts every 2 months. There’ve been no delays. Still, people have complained that their loans have yet to be forgiven, even though they believe they’ve had their loans for more than enough time.

What gives?

Usually, there’s wrong information in their repayment history.

We’ve used our TXT tool to review thousands of files for IDR payment credit. One of the most common errors we see is where a loan is disbursed, and the following entry for the loans isn’t until years later.

The only way we’ve been able to fix this for clients is to file a complaint with the FSA Ombudsman.

President Biden’s earlier cancellation attempt might’ve failed due to legal challenges, but this one has yet to suffer the same fate.

The department has delivered tens of billions of dollars of student debt relief under this one-time opportunity. It stands to deliver billions more as it keeps applying the IDR Waiver (aka Income Driven Account Adjustment), and more borrowers enter into the Direct Loan Program via loan consolidation.

We’ve helped hundreds of people qualify for this opportunity — especially those with Parent PLUS Loans and FFEL Program Loans. My team and I are ready to help you do the same.

Schedule a call with us today for a personalized strategy to possibly get your student loans forgiven.