The U.S. Department of Education is offering a student loan forgiveness opportunity to borrowers who act by April 30. The department is conducting a one-time adjustment of borrowers’ payments this summer, and those who request a consolidation by the end of the month could potentially have their debt canceled immediately or sooner than they would have otherwise. Consolidation can help borrowers get closer to loan forgiveness under income-driven repayment plans, where monthly payments are based on a share of discretionary income. Borrowers typically have their remaining debt forgiven after 10, 20, or 25 years, depending on the plan.
Many borrowers in income-driven repayment plans have multiple loans taken out at different times, resulting in multiple timelines to forgiveness. The Biden administration is currently allowing borrowers to combine their loans and receive credit going back to their first loan payment on the oldest loan in the bundle. This opportunity could enable borrowers to qualify for forgiveness sooner than they would have under their original timeline. All federal student loans are eligible for consolidation, including Federal Family Education Loans, Parent Plus loans, and Perkins Loans. Borrowers can apply for a Direct Consolidation Loan at StudentAid.gov or with their loan servicer.
Consolidation should not increase the monthly payment for borrowers under income-driven repayment plans as the bill is based on earnings, not total debt. The new interest rate after consolidation will be a weighted average of the rates across the loans. Before consolidating, borrowers should obtain a complete payment history of each loan to ensure they receive full credit for their payments. This information can be obtained from StudentAid.gov or by contacting the loan servicer. The payment count starts when the loans first entered repayment, not when they were borrowed.
Borrowers who believe there is an issue with their payment count can speak to their loan servicer or submit a complaint to the Department of Education’s Federal Student Aid unit. It is important to note that there should never be a fee for loan consolidation, and any request for payment should be seen as a potential scam. The deadline to take advantage of loan consolidation for potential forgiveness is April 30, and borrowers should act promptly to ensure they meet the requirements for this opportunity. By consolidating their loans and taking advantage of this one-time adjustment by the U.S. Department of Education, borrowers may be able to expedite their path to loan forgiveness and reduce the overall burden of their student debt.
