IDR Waiver Account Adjustment: How to Qualify for Forgiveness

The IDR Waiver, or income-driven repayment (IDR) waiver, is a plan to immediately wipe out the remaining loan balances for 40 thousand federal student loan borrowers and push many more three years closer towards IDR Forgiveness.

Income-driven repayment forgiveness is a benefit that waits for borrowers after they’ve made 20 or 25 years’ worth of payments under one of the four IDR Plans — Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE).

The IDR Waiver will give millions of borrowers credit toward IDR Forgiveness, no matter what payment plan they were previously enrolled in or even if they’ve only made a few payments since taking out the loans years ago. It’s the type of life-changing student debt relief people thought they would get with President Biden’s broad loan cancellation plan.

The waiver will also give a boost to those with qualifying employment for the Public Service Loan Forgiveness Program. These benefits are applied in addition to the benefits they received under the Limited PSLF Waiver, which ended on October 31, 2022.

Related: When Do Student Loans Go Away?

* President Biden announced plans to create a new income-driven repayment plan that will reduce monthly payments even further and accelerate loan forgiveness. The plan has not yet been created, but the Department hopes to have it ready by the end of 2023.

The waiver counts the time borrowers spent in any repayment plan towards the 240 to 300 qualifying payments needed for forgiveness under the IDR program. It will also credit borrowers pursuing PSLF forgiveness with the 120 qualifying payments needed to get their balance erased.

The Education Department announced in April 2022 it would increase the payment count for all borrowers with Ed-owned federal student loans by performing a one-time account adjustment. The adjustment will credit them for:

• Any month their account was in repayment status, regardless of the type of loan or repayment plan and whether payments were partial or late.

• Time spent in forbearance periods lasting at least 12 straight months or at least 36 total months.

• Any month spent in deferment — except in-school deferment — before 2013.

Nearly everyone is eligible for the IDR Waiver, but those with privately-held federal loans will need to consolidate by May 1, 2023, to get the benefits.

You can also download this Fact Sheet to see a complete list of the improvements.

Related: Brief History of Income-Based Student Loan Programs

The IDR Waiver is open to all federal student loan borrowers — including parents who borrowed loans to pay for their child’s college costs — regardless of the loan type, the amount paid, or the student loan repayment plan.

Related: Can Parent PLUS Loans Be Forgiven?

Most borrowers will get the relief automatically. Some with loans made through the Federal Family Education Loan Program and Perkins Loan Program will need to consolidate their loans by next spring to be counted in the account adjustments the department plans to make.

You’ll need to consolidate if interest continues to add to your balance, and you have had to keep making your monthly payments since President Trump announced the Covid forbearance in March 2020.

You can apply for loan consolidation on the Federal Student Aid website, StudentAid.gov.

Not sure what kind of loans you have? Log into StudentAid.gov with your FSA ID and select “My Aid” under your name. The new page will show whether your loans are Direct Loans, FFELP Loans, or commercially-held FFELP Loans.

The IDR Waiver will be applied on an ongoing basis from November 2022 through July 2023, according to the Education Department. At first, the department planned to finish reviewing borrowers’ student loan payment histories before payments were set to resume next January. But that got delayed after President Biden announced his student debt relief cancellation plan. The White House issued guidance to department officials to focus on making progress on the millions of applications it received in the days after the program went live.

The shift in priorities made sense. The broad debt relief could lead to roughly 40% of accounts being cleared from the department’s books.

There was one problem. A number of legal challenges were filed in response to the debt cancellation plan. The Biden administration got courts to dismiss many of the cases. But the one filed by six Republican-led states on behalf of MOHELA and other state-backed guaranty agencies did not meet the same fate. The federal court in Missouri blocked the department from applying the relief to borrowers’ accounts.

With the plan on hold until the Supreme Court reviews the case, the department’s focus has shifted to reviewing the petabytes of data it has on each borrower’s history of payments, forbearances, deferments, defaults, and so on.

Borrowers who’ve met the forgiveness criteria will get discharges of their student debt in the next few months. Moving forward, the department plans to track and update payment counts in its own data systems.

Related: Student Loan Forgiveness 2023: Who Qualifies?

Before the department stepped in with the waiver, borrowers only had a 1-in 23 thousand chance at cancellation under IDR, according to Julia Barnard, Student Loan Team Co-Lead and Researcher at the Center for Responsible Lending.

The reasons, according to an investigation by NPR, ranged from incompetence to student loan servicers purposefully steering borrowers into long-term deferment and forbearance periods to grift more cash from the federal government.

Consumer advocacy groups and lawmakers latched on to the NPR revelations and petitioned the Biden administration to find fixes to a program that was just as broken as the Public Service Loan Forgiveness Program.

The White House responded with a pledge to retroactively help millions of borrowers hurt and held back by longstanding flaws and ineffective management of the IDR program.

“Today, the Department of Education will begin to remedy years of administrative failures that effectively denied the promise of loan forgiveness to certain borrowers enrolled in IDR plans,” U.S. Department of Education Secretary Miguel Cardona said in a press release announcing the IDR Waiver.

The department and its office of Federal Student Aid (FSA) promised to conduct a “one-time account adjustment” to credit borrowers with more payments towards loan forgiveness.

IDR credits count towards PSLF eligibility. The adjustment lets borrowers consolidate loans without losing past credit if done by Dec. 31, 2023. This helps public sector workers gain PSLF credit, regardless of their loan type (Direct or Direct Consolidation Loan). Borrowers with incorrect loan types or repayment plans can fix these issues, earn credit for past service, and pursue loan cancellation or further credit.

To use IDR adjustment for PSLF, borrowers must provide proof of qualifying public service employment during the credited months. They can do this by filling out the PSLF form or using the PSLF Help Tool. No specific deadline exists for certifying past employment, but borrowers must work in public service when applying for cancellation and keep their qualifying job until approval.

For example, a teacher who worked at a public school for five years but had a non-qualifying loan type could consolidate their loans before the end of 2023. They would then submit proof of their past employment and could earn PSLF credit for the five years of public service, moving closer to loan cancellation.

Related: When Did PSLF Start?

All borrowers with loans made through the Direct Loan Program — including Parent PLUS Loans — and the federally managed Federal Family Education Loan Program qualify for the waiver.

Those with commercially-held FFEL Loans — i.e., people with federal loans whose monthly payments weren’t suspended during the pandemic — and Perkins Loans must apply for a Direct Consolidation Loan by next May to get the full benefits of the program. The new Direct Loan will get credit for all the payments you made and certain deferment and forbearance periods you were in before you consolidated, according to published guidance.

If you work full-time in a public service job, you may also get retroactive credit toward the PSLF Program.

There is no IDR Waiver form to fill out or application process to go through to get credit toward forgiveness. The only eligibility requirement is that the Education Department owns your loans. The department has worked immediately on the changes for the federal loans it owns. Borrowers should see the updated payment counts applied to their accounts starting November 2022.

If your loans aren’t owned by the department, such as FFELP Loans with AES or Navient, you must apply for a Direct Consolidation Loan by May 1, 2023, to qualify for the IDR Account Adjustment.

In all cases, you shouldn’t have to submit a copy of your payment counts or proof of your forbearance status to get the payment count revision. I’d resist producing any added information or taking any actions until I heard from the department. If their numbers don’t jibe with your documentation, then contact your servicer or the FSA Ombudsman to request a review.

Yes. Even if you don’t immediately have enough payments to get your debt forgiven, the IDR Account Adjustment may allow you to have your student loan debt forgiven years sooner than you would otherwise be eligible. You would simply need to take the necessary steps to enroll in an income-driven repayment plan and make enough IDR payments to cross the threshold for forgiveness.

The one time you wouldn’t want to take advantage of the waiver is if you have a low balance on your commercially held FFEL Loans, have been in repayment for less than 20 years, and make a lot of money. Under that scenario, you must make the remaining payments under one of the income-driven repayment plans, which could lead to you paying the debt off before it is forgiven. You’d probably do better refinancing the debt with a private lender. You might snag a lower interest rate and save money.

If you go that route, use an online marketplace like Credible to shop with multiple companies simultaneously. Keep in mind that to get the best interest rate, you’ll need a good credit score and enough income to cover your mortgage and debt from credit cards and other student loans.

How many payments do I need to get my loans forgiven?

You’ll need 300 payments if you borrowed federal loans for graduate school. Parent PLUS Loan borrowers might also need the same number of payments. If you only borrowed loans as an undergraduate student, you might only need 240 payments, depending on how the Education Department implements the waiver credit.

How far back will the ED count IDR payments?

It’s not yet clear how far back the department will look into borrowers’ payment histories.

Three scenarios are possible:

• Your credit starts when you first begin to repay your loans.

• The clock starts in 1994 when the first IDR plan was available.

• The department starts counting from when it put the IBR plan in place, which was in 2009.

What will my payment count be for my consolidated loans?

If your consolidation is made up of loans that entered repayment at different times, you may be given credit for the loan with the highest payment count. The department did this with the PSLF Waiver. It has yet to say how it will handle this scenario.

Will I get credit for the payments I made while I was in default?

You will not be given credit for any of the time your loans were in default, whether you made voluntary payments or money was taken from you through wage garnishment or tax refund offset. If you’re still in default, use Operation Fresh Start to quickly get your loans back on track.

Why is the department only giving credit for periods of deferment before 2013?

Under the IDR rules, economic hardship deferment count toward IDR forgiveness but not PSLF. The data the Education Department can access from before 2013 is hazy. To avoid issues with cheating borrowers out of IDR payment credit, the department has chosen to credit borrowers for all periods of deferment, other than in-school deferment, before 2013.

What if I refinanced my federal loans with a private lender?

Unfortunately, you’re ineligible for this opportunity if you refinanced your federal student loans with a private lender during the payment pause or earlier.

What if I had less than 12 or more months of consecutive forbearance or 36 months or less of total forbearance?

You can file a complaint with the FSA Ombudsman to review your situation.

The IDR Waiver is a one-time revision that remedies past administrative failures and inaccuracies that cheated borrowers out of progress toward IDR forgiveness. It’s one of the many changes the White House has made to existing student loan forgiveness programs to clear hurdles in the approval process for a much larger group of borrowers than were previously awarded relief.

Confused about your eligibility for the IDR Waiver and one-time account adjustment? Let’s talk. Schedule a call with me to quickly determine what steps you need to take to get your loans forgiven.

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