A student debt forgiveness program approved by President Joe Biden's administration is coming to an end this month.
Biden passed a range of student debt forgiveness programs, with at least $167 billion in student loans erased for about 5 million borrowers. But the income-driven repayment (IDR) account adjustments have allowed a substantial number of borrowers to make payments based on their income and family size, leading to many balances being cleared in their entirety after 20 or 25 years.
With Biden's changes to the plans, student loan borrowers could get credit for previous loan periods that didn't go toward their IDR plans. More than 1 million borrowers have seen forgiveness courtesy of the IDR account adjustments, the Education Department has said.
"If you're on an IDR plan or working toward PSLF, your remaining loan balance gets forgiven after you make the required number of payments," the Education Department said previously about IDR account adjustments.
"In the past, there were a variety of reasons why some months may not have been credited toward loan forgiveness—for example, months when you were in a payment plan that wasn't eligible. With this payment count adjustment, we will change whether certain payments or months are credited toward your loan forgiveness."
The Biden administration said it would complete the program's implementation in August, but there's uncertainty regarding future borrowers hoping to take advantage of the program.
"The U.S. Department of Education [ED] currently expects that the payment count adjustment will be completed by Sept. 1, 2024," the Education Department said on StudentAid.gov. "When we implement the adjustment, it will automatically be applied to all Direct Loans and FFEL Program loans that are managed by ED at that time. This includes Direct Consolidation Loans that repaid a privately held Perkins or FFEL Program loan and that are disbursed before the adjustment occurs."
While direct federal student loans are automatically eligible for IDR account adjustments, borrowers with some FFEL (Federal Family Education Loan) debt needed to apply for the direct consolidation program by June 30.
The Education Department previously said the IDR account adjustments would be made complete by January 1 of this year, but then pushed the deadline back to July 1. Now, borrowers have roughly a week left.
While the new date is September 1, borrowers might not see their loans immediately forgiven because the full discharge process can take multiple months.
The IDR account adjustment program has received legal pushback as a federal appeals court blocked Biden's SAVE plan, one of the most popular IDR plans. There are roughly 8 million borrowers under a SAVE plan that are now seeing their loans put in forbearance as a result.
The court order also indicates other IDR plans could be at risk, including the income-contingent repayment or pay as you earn programs. While Biden's administration filed a request for more information about the injunction's impact on these plans, the court rejected the request.
Michael Ryan, a finance expert and founder of michaelryanmoney.com, said there had been widespread problems with loan servicers miscounting borrowers' qualifying payments under IDR plans and the Public Service Loan Forgiveness program.
"The adjustment allowed the Department of Education to go back and review borrowers' payment histories to ensure they got credit for all eligible payments—even partial or late ones," Ryan told Newsweek.
"This was important for borrowers who had been diligently making payments for 20 or 25 years under IDR plans, or 10 years under PSLF only to find out their progress hadn't been properly tracked."
He said for the millions affected by the plans, the impact was substantial.
"Providing major financial relief to borrowers who had been saddled with student debt for much of their adult lives," Ryan said. "People can now finally get out from under this burden and focus on building their futures."
Because the IDR plans' future is jeopardy, Ryan said borrowers who haven't yet reached their forgiveness thresholds need to stay on top of their repayment plans and be aware of any new developments.
"The need for continuous oversight and responsibility in federal student aid programs is crucial," Ryan said. "The IDR adjustment highlighted how administrative issues can significantly impact borrowers. While this initiative offered important relief...more reforms are still necessary to address the fundamental causes of the student debt crisis."
Michael Lux, an attorney and founder of the Student Loan Sherpa, said many borrowers will find themselves much closer to the 20 or 25 years required for IDR forgiveness after the government finishes its process this month.
"In many cases, pursuing forgiveness may now be a more effective strategy than repayment in full," Lux told Newsweek. "It is a great time to revisit your repayment history and review your strategy moving forward. The IDR adjustment could shift the math for many borrowers."
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