IDR Waiver Account Adjustment: How to Qualify for Forgiveness

A staggering 3.6 million borrowers are set to benefit as the Department of Education takes decisive action to address historical shortcomings in federal student loan programs. The changes will bring borrowers significantly closer to Public Service Loan and Income-Driven Repayment Plan Forgiveness, marking a new era in student debt relief.

Introducing the Transformative IDR Waiver

• Eliminates remaining loan balances for 40,000 federal student loan borrowers.

• Fast-tracks others toward IDR forgiveness.

Key Implications

The IDR Waiver, or IDR Account Adjustment, provides retroactive credit toward IDR forgiveness, regardless of borrowers’ previous payment plans or history. Additionally, the waiver improves benefits for those with qualifying employment under the Public Service Loan Forgiveness Program and PSLF Waiver.

Timeline for Student Loan Forgiveness Relief

• The IDR waiver will be applied by the Education Department, with borrowers reaching the 20-or-25-year milestone by August 1, 2023, receiving complete loan forgiveness before payments resume after the ongoing student loan pause. Borrowers reaching the threshold after August 1, 2023, will receive a discharge after payments resume, with other borrowers receiving credit on a rolling basis through 2024.

What’s Next?

The Department is developing a new Revised Pay As You Earn Plan to further reduce monthly payments and accelerate loan forgiveness. While not yet finalized, the plan is expected to be ready by the end of 2023.

Related: When Do Student Loans Go Away?

The Income-Driven Repayment (IDR) Account Adjustment, also known as the IDR Waiver, is a policy implemented by the Department of Education to correct historical failures in the administration of federal student loan programs.

This adjustment aims to help borrowers move closer to Public Service Loan Forgiveness and income-based repayment forgiveness. IDR plans allow borrowers to make payments on their federal student loans based on a calculation that considers their income and family size.

If a borrower’s federal student loans aren’t fully repaid at the end of the repayment term (either 20 or 25 years, depending on the type of plan), any remaining loan balance is forgiven.

The IDR Account Adjustment provides loan forgiveness by granting backdating credit towards IDR forgiveness and eliminating remaining loan balances for 40 thousand federal student loan borrowers.

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.

In April 2022, the Education Department announced 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 months of consecutive forbearance or at least 36 total months.

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

Related: Brief History of Income-Based Student Loan Programs

Most borrowers will receive relief automatically. However, borrowers with loans through the Federal Family Education Loan Program or the Perkins Loan Program must consolidate their loans by next spring to benefit from account adjustments.

Related: Can Parent PLUS Loans Be Forgiven?

Consolidation is necessary if interest continues to add to your balance and you have made monthly payments since the Covid forbearance was announced in March 2020. You can apply for consolidation on StudentAid.gov.

Not sure what type of loans you have? Log into StudentAid.gov with your FSA ID and select “My Aid” under your name. You’ll see whether your loans are Direct Loans, FFELP Loans, or commercially held FFELP Loans.

The IDR waiver will be applied by the Education Department, with borrowers reaching the 20-or-25-year milestone by August 1, 2023, receiving complete loan forgiveness before payments resume after the ongoing student loan pause. Borrowers reaching the threshold after August 1, 2023, will receive a discharge after payments resume, with other borrowers receiving credit on a rolling basis through 2024.

Initially, the department planned to finish reviewing borrowers’ payment histories before payments resumed in January. But the plan was delayed due to President Biden’s debt relief cancellation program. Millions of applications for relief were then received by the administration, which became the focus of department officials. This broad debt relief could lead to roughly 40% of accounts being cleared from the department’s books.

But the debt relief program was met with legal challenges. While many cases were dismissed, a federal court in Missouri blocked the department from applying the relief to borrowers’ accounts in response to a case filed by six Republican-led states on behalf of MOHELA and other state-backed guaranty agencies. As the plan is now on hold until the Supreme Court reviews the case, the department’s focus has shifted to reviewing each borrower’s payment history data.

Borrowers who meet the forgiveness criteria will have their student loan debt discharged in the coming months. Going forward, the department plans to track and update payment counts in its own data systems.

The IDR adjustment was created to address the extremely low likelihood of cancellation under IDR, which was only 1 in 23,000, according to Julia Barnard, Student Loan Team Co-Lead and Researcher at the Center for Responsible Lending.

NPR’s investigation found that reasons for this ranged from incompetence to student loan servicers intentionally steering borrowers into long-term deferment and forbearance periods to extract more money from the federal government.

In response to consumer advocacy groups and lawmakers, the Biden administration pledged to help millions of borrowers impacted by the flawed management of the IDR program.

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?

To apply for the IDR Waiver, you don’t need to fill out a form or go through an application process. The only requirement is that the U.S. Department of Education owns your loans.

The department has already made the necessary changes for the federal loans it owns. Starting in November 2022, you should see the updated payment counts applied to your accounts.

If your loans aren’t owned by the department, there’s a different process you need to follow to qualify for the IDR Account Adjustment. You must apply for a Direct Consolidation Loan by the end of 2023.

Don’t worry, you don’t need to submit any extra paperwork or take any extra steps to get the payment count revision. Just wait to hear from the department. If their numbers don’t match your records, contact your servicer or the FSA Ombudsman for a review.

The IDR Waiver is a one-time revision that fixes past mistakes that prevented borrowers from making progress toward IDR forgiveness. The White House has made this and other changes to existing student loan forgiveness programs to help more borrowers get 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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