How the IDR Account Adjustment Really Works

#1 Student loan lawyer

Updated on December 27, 2023

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 Account Adjustment gives borrowers loan forgiveness credits they’re owed for mismanagement by student loan servicers. The adjustment is known by many names, including the IDR Waiver and the Payment Count Adjustment. No matter what name is used, 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 President Biden’s broad-based student loan forgiveness plan for millions of Americans, the adjustment is working just fine. The government has wiped out over $44 billion in balances for over 900,000 people, said Richard Cordray, chief operating officer of the Federal Student Aid Office.

Attorney Stanley Tate in orange hoodie against a blue background with text 'IDR WAIVER EXPLAINED' and a graduation cap icon, indicating an educational video or resource on Income-Driven Repayment (IDR) waiver.

Watch this video for a deep dive into how the IDR Waiver works

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: Next July, 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.

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The fastest way to get Parent PLUS Loan Forgiveness

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 forgiveness works, please visit our article on Income-Driven Repayment Plan Forgiveness.

What is the IDR Waiver?

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 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-Contingent Repayment Plan — became available.

What Will You Get Credit For?

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.

  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.

How Much Credit Do You Need?

  • You need credit for 20 years of payments (240 months) if you only borrowed loans for undergrad.

  • And you need credit for 25 years of payments (300 months) 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?

Does the IDR Waiver Work?

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 program.

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

Waivers Have Already Happened For Some

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.

Email of IDR Waiver update sent to client.

This is the email the Education Department is sending borrowers who've met their milestone under the IDR Waiver.

Some Will Need to Consolidate

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

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

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.

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Others Will Need to Get Out of Default

You can still get the benefits of the 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.

The Waiver & PSLF Program

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 IDR 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 Adjustment. You combine loans into a Direct Consolidation Loan for more forgiveness credit.

The Education Department 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.

How to Know Your IDR Waiver Credit

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.

IDR Waiver Delays

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.

Screenshot of TXT file from StudentAid.gov showing different dates and loan repayment statuses.

Bottom Line

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 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 loans forgiven.

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FAQs

Can I Benefit from the IDR Waiver If I Have Health Education Assistance Loans?

Yes, borrowers with HEAL Loans can benefit from the IDR Account Adjustment. But you must consolidate your HEAL Loans into a Department-held Direct Consolidation Loan before April 30, 2024.

How Can I Maximize My IDR Waiver Account Adjustment?

To get the most out of the IDR Waiver, consider consolidating your loans into a Direct Consolidation Loan, especially if you have loans held by third parties or with different repayment periods. The Direct Consolidation Loan will be credited with the longest repayment period accrued on the individual loans being consolidated.

Does Bankruptcy Forbearance Count in the IDR Adjustment?

Unfortunately, no definitive information states that bankruptcy forbearances will be counted in the one-time IDR adjustment. According to the Department of Education, time spent in a bankruptcy status does not count as time in repayment or towards the various forbearance exceptions. For more detailed information about your situation, it’s best to contact your loan servicer or consult a student loan expert.

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