Income-Driven Repayment Waiver Offers Relief for Millions of Borrowers

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  • Over 3.6 million borrowers will gain progress towards income-driven repayment forgiveness.
  • Payments or periods of forbearance that previously didn’t count toward forgiveness now will.
  • Check your student loan account and call your servicer to see how these changes might impact you.

The Department of Education announced this week that it will bring millions of borrowers closer to student loan relief by fixing “historical failures in the administration of federal student loan programs,” per a press release. These changes will impact Public Service Loan Forgiveness and income-driven repayment forgiveness.

In the press release, the department said at least 40,000 borrowers will receive immediate debt cancellation through PSLF, and several thousand more borrowers with older loans will receive forgiveness through IDR. More than 3.6 million borrowers will get at least three years of additional credits toward IDR plans, bringing them closer to forgiveness.

“The income-driven repayment waiver is a massive opportunity, particularly for borrowers who have been in repayment or have had student loans for a very long time,” says Travis Hornsby, the founder and CEO of Student Loan Planner.

If you have an IDR or PSLF plan, you don’t need to take any action at the moment to qualify for this new waiver — these changes will appear in your account in time. If you are working towards PSLF, you’ll need to make sure your annual certification and application form is up to date. If you have questions about whether or not you qualify, contact your loan servicer. Some borrowers whose loans have not been paused during the pandemic may need to consolidate their loans to qualify for this waiver.

What are the main changes that I need to know about?

  • Periods of long-term loan forbearance may now count toward IDR forgiveness and PSLF

The Department of Education is making a one-time adjustment to borrowers’ accounts that will count forbearances of more than 12 consecutive months and more than 36 total months toward forgiveness under IDR and PSLF.

This change is being made because student loan servicers may have inappropriately directed borrowers into loan forbearance, even when payments under an IDR plan could have been as low as $0. A borrower in an IDR plan can net a reduced payment, stay in good standing, and progress toward loan forgiveness, while a borrower directed to choose forbearance may see their loan balance and monthly payments increase and may ultimately default on their loans.

  • One-time revision of which previous payments count toward IDR

Now, all months in which borrowers made payments will count toward IDR, no matter what repayment plan they made them under. Payments made prior to consolidating your loans will also count. Previously, if you consolidated any loans, you would reset all progress made toward IDR. All deferments of payments before 2013 — not including in-school deferments — will also count toward forgiveness.

You’ll receive loan cancellation automatically if after this payment-count revision you’ve made the required number of payments for IDR forgiveness.

The Department of Education says it will begin making the changes immediately, but you may not see the impact of this change in your federal student loan account until the last quarter of 2022.

What should I do now?

Check your student loan account to see your payment history and current payment plan and keep a detailed record of your current account details. This will help you catch any errors as the Department of Education implements these changes across millions of borrowers’ accounts.

Then, follow up with your loan servicer to see if and how these changes may impact you and get you further on your path to student loan forgiveness.

What is an income-driven repayment plan?

When you take out a student loan, the federal government will automatically set you up with the Standard Repayment Plan, a program that consists of 10 years of fixed monthly payments.

In contrast, income-driven repayment (IDR) plans take your particular income and family size into account when calculating monthly payments. Depending on those factors, you’ll make monthly payments that will be a percentage of your discretionary income (usually 10% to 20%) for 20 to 25 years. Payments may even be as low as $0 per month. After 20 to 25 years, you’ll be eligible for student loan forgiveness for any remainder. Income-driven repayment is not available on private loans.

Previously, the government could treat the forgiven amount as taxable income, but that requirement was recently revoked for any money forgiven through 2025.

What is Public Service Loan Forgiveness?

Public Service Loan Forgiveness, or PSLF, forgives the debts of graduates working in the public sector after at least 10 years of service and qualifying payments. Your specific job doesn’t matter, just that you work for a public service employer. There’s no cap on the amount of money that can be forgiven.

You must meet the following requirements to qualify for PSLF:

  • Be an employee of the US federal, state, local, or tribal government, or an eligible nonprofit organization (this includes military service)
  • Work full-time for that employer
  • Have Direct Loans
  • Make 120 qualifying payments

Last fall, the Department of Education made significant changes to the PSLF program. All repayment plans now count for PSLF, whereas previously, you had to repay your loans under an IDR plan to be eligible for the program. Additionally, you can consolidate previously ineligible loans, like Perkins Loans and FFEL Loans, into a Direct Consolidation Loan to qualify.

Read more about the limited-time PSLF waiver.