Borrowers Have More Time to Consolidate Loans to Benefit from IDR Account Adjustment
In December, the U.S. Department of Education announced an extension of a key student loan forgiveness deadline, providing more time for borrowers who need to consolidate their loans in order to qualify for possible relief through the IDR Account Adjustment. Borrowers who need to consolidate their loans via the federal Direct loan program to qualify or maximize the program’s benefits now have until April 30, 2024, to apply, an additional four months past the original deadline of December 31, 2023.
What Is the IDR Account Adjustment?
The IDR Account Adjustment is a temporary program that could provide certain student loan borrowers with retroactive credit toward loan forgiveness. Borrowers are eligible for forgiveness if they have accumulated the equivalent of either 20 or 25 years of qualifying months, depending on the type of loans they have and their specific plan.
On August 14, 2023, the Department of Education announced that automatic discharges would begin for more than 800,000 borrowers as a result of fixes to income-driven repayment (IDR) plans implemented to ensure all borrowers have an accurate count of the number of monthly payments that qualify toward forgiveness under their plan. It was estimated at the time that nearly 27,000 Michiganders were eligible for more than $1.2 billion in loan forgiveness under the program. Borrowers with qualifying loans and the equivalent of 20 or 25 years of qualifying monthly payments were notified directly that their loans were being discharged. Since the summer of 2023, the U.S. Department of Education has approved nearly $44 billion in debt relief for more than 900,000 borrowers as part of the payment count adjustment.
Who Needs to Consolidate via the Federal Direct Loan Program?
- Borrowers with commercially managed FFEL loans, Perkins loans, and/or other non-Direct federal student loans
- Borrowers with multiple federal loans with different repayment histories
The payment count adjustment is automatic for Direct or federally managed FFEL loans – there is no application required. The Department is reviewing the Direct and FFEL loans they hold and working with their loan servicers to update borrower accounts.
What’s the Timeline Moving Forward?
In a blog post by Federal Student Aid Chief Operating Officer Richard Cordray, he notes: “[W]e expect to complete the full adjustment by July 1, 2024. That means all borrowers with Direct or Federal Family Education Loan (FFEL) Program loans held by the Department will see their progress toward forgiveness update automatically after that point. Borrowers with loans not currently held by the Department, such as those with commercially held FFEL or Perkins loans, can get the benefit of the adjustment by applying to consolidate by April 30, 2024. Most consolidation loans are disbursed within 60 days, but some take longer, so we encourage borrowers to apply as soon as possible.”
What If I Don’t Know What Kind of Loan(s) I Have?
Log in to StudentAid.gov and click the “Loan Breakdown” section to view a list of your loans.
- Direct Loans begin with the word “Direct.”
- Federal Family Education Loan Program loans begin with “FFEL.”
- Perkins Loans include the word “Perkins” in the name.
- If the name of your servicer starts with “Dept. of Ed” or “Default Management Collection System,” your FFEL or Perkins loan is federally managed (i.e., held by the Department).
- S. Department of Education Blog Post, “Seven Things to Know About the Student Loan Payment Count Adjustment,” December 18, 2023
- gov webpage on the IDR Account Adjustment