Q&A: The New Student Loan Income-Driven Repayment Account Adjustment

In November, 813,000 longtime borrowers got an email from President Biden saying their loans were forgiven, thanks to the IDR account adjustment. More relief is on the way.
Eliza Haverstock
Anna Helhoski
By Anna Helhoski and  Eliza Haverstock 
Updated
Edited by Karen Gaudette Brewer

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On Nov. 28, roughly 813,000 longtime federal student loan borrowers received an email from President Joe Biden: "Congratulations — your student loan has been forgiven," the message said. It's the result of an automatic IDR account adjustment, previously called the "IDR waiver," announced by the Biden administration in April 2022. Under this one-time program, the U.S. Department of Education is reconsidering what counts toward income-driven repayment (IDR) forgiveness.

So far, nearly 855,000 longtime student loan borrowers are in line for $42 billion worth of relief — including the 813,000 who got emails in November. By 2024, millions of borrowers will find themselves closer to student loan forgiveness or see their balance wiped away entirely.

IDR plans offer reduced payments over 20 or 25 years, depending on loan type, then forgive the remaining balance. The program was created in the 1990s to protect borrowers from financial hardship; payments are based on the borrowers’ income, not the balance owed.

This account adjustment bends the rules on which payments count towards IDR forgiveness, so a great number of months you've ever spent in student loan repayment or on pause since leaving school will count toward forgiveness after the adjustment is applied — even if you've never enrolled in an IDR plan before.

It also applies to borrowers who qualify for Public Service Loan Forgiveness (PSLF), which erases remaining loan balances after just 10 years of payments.

At a minimum, more than 3.6 million borrowers will receive at least three years of additional credit toward IDR forgiveness to account for the pandemic payment pause, according to a 2022 Education Department estimate.

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Has the account adjustment started?

Yes.

Starting in the spring of 2023, PSLF borrowers with older loans began to see their remaining balances erased.

In July, the White House announced that 804,000 longtime federal student loan borrowers would receive a total of $39 billion in loan forgiveness under the account adjustment. The White House announced the next wave of relief in early October: 51,000 borrowers will get around $3 billion in loan forgiveness.

All told, the IDR account adjustment has forgiven roughly $42 billion in loans among 855,0000 borrowers. About 813,000 have been notified, as of Nov. 28.

The Education Department said it will continue to identify and notify borrowers who have reached the applicable forgiveness thresholds — 20 or 25 years — about every two months until 2024, at which point all borrowers who are not yet eligible for forgiveness will have their payment counts updated. That means the third wave of relief notifications should hit by December.

Do I have to do anything?

The recount is automatic for most. But certain borrowers may still have to act:

Borrowers with commercially-held federal loans must consolidate. To benefit from the recount, borrowers must have direct loans. That means borrowers with commercially-held FFELP, Perkins or Health Education Assistance Loan (HEAL) Program loans must consolidate them into a federal direct loan by the end of April 2024 to be included.

Public Service Loan Forgiveness-seeking borrowers must apply for PSLF. Borrowers who work in public service must submit an employment certification form and PSLF application no later than the end of 2023, in order to see the adjustment count toward PSLF. If they have payments remaining after the review, they’ll need to enroll in an IDR plan.

Some borrowers may need to enroll in IDR. Federal borrowers whose debts are not wiped clean in 2023 will see their past payments reviewed in 2024. Borrowers must enroll in an IDR plan to take advantage of the recount and continue to build credit towards IDR forgiveness. Payments they make after the account adjustment won’t count toward forgiveness if they don’t enroll.

Why is the IDR account adjustment happening?

The account adjustment is meant to address past missteps in the IDR and PSLF programs, including student loan servicers miscounting payments and needlessly putting borrowers into forbearances, which pauses payments but allows interest to rack up.

As a result of these errors, forgiveness through older IDR plans has been notoriously tricky. As of March 2021, only 32 borrowers had ever seen their debt forgiven despite decades of payments, according to a joint study from the National Consumer Law Center and the Student Borrower Protection Center.

What will count toward IDR forgiveness?

The IDR account adjustment will result in loan discharges for:

  • Borrowers who have made 20 or 25 years of payments (240 and 300 monthly payments, respectively), under any payment plan.

  • Borrowers who have submitted a PSLF application and who reach 120 payments as a result of changes to deferment qualifications outlined below.

If you’re unsure if this applies to you, here’s what counts as a qualifying past payment under the one-time review, through August 2023:

  • Any month a borrower was in repayment, even if the payments were late or partial. The type of repayment plan doesn’t matter.

  • Time spent in forbearance, either periods lasting 12 or more consecutive months or a cumulative 36 or more months. 

  • Any month spent in deferment, other than in-school deferment, before 2013.

  • Any month spent in economic hardship or military deferments in 2013 or later.

  • Any months in repayment, forbearance or a qualifying deferment before a loan consolidation.

  • Any months spent in COVID-19-related forbearance.

In 2024, the Education Department will automatically apply the above payment count rules to all federal direct and government-owned Federal Family Education Loan Program loans. Those with commercially held FFELP loans must consolidate their debt into a new direct loan by the end of April 2024 in order to have past payments counted.

Will parent PLUS loans qualify?

Parent PLUS loans are eligible for both the IDR recount and the PSLF component.

If you hold parent PLUS loans that could be eligible for PSLF, you should update your employment certification history to reflect all periods of public service employment.

To qualify for PSLF, the parent who originally took out the parent PLUS loan must work in a qualifying public service job. It doesn't matter if the student or other parent holds a qualifying job.

Will my servicer know if I qualify?

It’s unlikely your servicer will have immediate information, because the Education Department is processing the payment recount. If you qualify for loan forgiveness under the IDR account adjustment, the Education Department will notify you via email before the forgiveness is processed. You’ll have a chance to opt out of the forgiveness at that point.

If you want to estimate how many months of IDR credit you could get, you’ll have to do some digging yourself. Log in to your Federal Student Aid account at StudentAid.gov to see what types of loans you have and how long you’ve been in repayment. For details, including payment history and descriptions of specific forbearance or deferment periods, request your account history from your servicer.

Your servicer will notify you directly once the forgiveness is processed.

What if I had delinquencies or a student loan in default?

These income-driven repayment plan fixes will not apply toward forgiveness for borrowers with loans currently in delinquency or default, according to the Education Department.

However, as part of the Education Department's “Fresh Start” program, which is available through at least September 2024, borrowers with delinquent or defaulted student loan debt can return to good standing when payments restart.

Past months spent in default generally won’t count towards the IDR account adjustment, but borrowers who get out of default before the Fresh Start program ends will get IDR credit for any months spent in default from March 2020 until the month they exit default.

“After the Fresh Start period, only borrowers who rehabilitate to leave default will benefit from the adjustment, but they will not receive credit for periods in default during the payment pause,” the Education Department writes.

Can I get a refund?

If you get your loan balance forgiven under the IDR account adjustment, it’s possible that you actually overpaid. In most cases, you’ll get a student loan refund for any overpayments beyond 20 or 25 years.

The extra payments made on forgiven loans will be refunded back to the most recent of these three dates:

  • The date you reached the required number of payments for IDR forgiveness – 20 or 25 years of monthly bills. 

  • The date when the Department of Education acquired your loan.

  • The disbursement date of your consolidation loan.

Your servicer will notify you if the IDR account adjustment will erase your remaining loan balance. If you qualify for a refund, expect to receive it within about two months of the loan forgiveness.

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