A key student loan forgiveness opportunity under the Biden administration is coming to a close, as the June 30 deadline approaches for borrowers to consolidate their loans in order to qualify for the IDR Account Adjustment. This initiative has already resulted in at least $51 billion in student debt cancellation for more than a million borrowers and aims to address issues with income-driven repayment plans and Public Service Loan Forgiveness. Borrowers must consolidate their loans through a federal program to maximize benefits under the account adjustment, with the deadline fast approaching.
The IDR Account Adjustment allows the Education Department to credit borrowers with time toward student loan forgiveness for past periods that may not have counted under earlier IDR and PSLF rules. Borrowers become eligible for loan forgiveness after making the required number of payments on IDR plans or PSLF. The initiative aims to change whether certain payments or months are credited toward loan forgiveness and can result in automatic discharge or bring borrowers closer to eligibility for loan forgiveness.
Government-held federal student loans qualify for the IDR Account Adjustment automatically, but borrowers with other types of loans, such as commercially-held FFEL loans, Perkins loans, or HEAL loans, need to consolidate through the Direct federal consolidation program before the June 30 deadline. This extension was granted by the Biden administration in May, and borrowers must apply to consolidate by the deadline to be considered timely for the account adjustment. The Education Department plans to complete the adjustment by September.
Some borrowers may want to consolidate their loans through the Direct loan program before the June 30 deadline for reasons other than pursuing the benefits of the IDR Account Adjustment. This includes borrowers with FFEL-program loans seeking PSLF, borrowers with multiple federal student loans with different repayment histories, and Parent PLUS loan borrowers looking to qualify for IDR plans or PSLF. Consolidation may be beneficial depending on individual circumstances.
Legal challenges have targeted the IDR Account Adjustment, with a federal appeals court upholding the dismissal of one challenge last month. Two pending legal challenges are seeking to block the Saving on a Valuable Education plan, a new IDR option that could impact repayment terms for borrowers. The elimination of SAVE could make repayment more expensive for borrowers relying on IDR plans for loan forgiveness. Despite these challenges, the IDR Account Adjustment remains in effect, providing relief for borrowers seeking student loan forgiveness.
