Hey bestie, it’s Your Wealth Bestfriend Jala. It’s that time again—time to talk about these student loans. Have ya’ll noticed I’ve been quiet about Sallie Mae? I was hoping she would decide to leave us alone. Instead, she gave us a deadline, so we have to chat about it, bestie.
Right now, the U.S. Department of Education is running a one-time payment-count adjustment for anyone on an income-driven repayment plan. This is basically a recalibration by the federal government to compensate for years of failing to provide little relief for student loan borrowers who have had loans for a while.
The IDR adjustment allows the following payments or months to count toward forgiveness:
Any months in a repayment status, regardless of payments made, loan type, or repayment plan
12 or more months of consecutive forbearance or 36 or more months of cumulative forbearance
Any months spent in economic hardship or military deferments in 2013 or later
Any time in repayment on earlier loans before consolidation of those loans
Under the IDR adjustment, virtually any type of payment, forbearance, or deferment counts towards the payments needed for forgiveness — which means your loans could get forgiven faster.
The issue is that it’s tricky to ensure that you have loans that qualify and that the adjustment makes sense for you.
The deadline is April 30! — just days away. Therefore, the Department of Education will complete a one-time payment count adjustment for borrowers on income-driven repayment (IDR) by July 1, 2024.
This adjustment is for those who are seeking to have their loans forgiven after 20 or 25 years of payments. But remember when payments didn’t count if you were on deferment, you were in school, you took a forbearance, or your payment was less than the minimum? Now, this is the one time the federal government says these time periods will count as payments.
The adjustment is automatic for borrowers with Direct or federally managed Federal Family Education Loan (FFEL) Loans. However, borrowers with commercially held (private) Perkins Loans, commercially managed (private) FFEL Loans, or Health Education Assistance Loans (HEAL) do not automatically qualify for the IDR adjustment and must consolidate their loans to be eligible.
Under normal rules, when a borrower with Perkins, FFEL, or HEAL loans consolidates their loan(s), their repayment count is reset to zero for certain forgiveness programs, including IDR Forgiveness. Under the updated, temporary rules, borrowers who consolidate their loans will be reviewed under the IDR adjustment and will receive credit for all past periods of repayment, forbearance, or deferment, without resetting their payment count. This is especially critical for borrowers who have been in repayment for at least 20 years, as you may already be eligible for forgiveness. Because consolidation typically takes at least 60 days, borrowers need to submit a federal consolidation application at studentaid.gov/loan-consolidation as soon as possible.
TIPS:
Consolidate your federal student loans by April 30
Consolidate your student loans at www.studentaid.gov/loan-consolidation. If you consolidate your federal student loans with a private lender, you’ll lose key protections like forbearance periods, whether personal or nationwide, like the pandemic payment pause.
If you decide to consolidate, don't forget to look at the interest rate.
Experts recommend checking studentaid.gov for your most accurate payment history before starting the consolidation process. This way, when your loans are consolidated, you’ll be able to double-check the payments that count toward forgiveness.
The application form will ask you to select a student loan servicer. Do your research before selecting one.
To confirm your loan type, you can log on to StudentAid.gov. On your dashboard, you can 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). If you have questions about your loans or are unsure if consolidation is right for you, please contact your loan servicer or the Department of Education.