In April 2022, the Biden administration announced sweeping, temporary changes to income-driven repayment (IDR) programs for federal student loan borrowers. The changes will dramatically expand what can be counted toward a borrower’s loan forgiveness term.
The IDR changes, which the administration calls an “IDR Adjustment,” follow a similar set of broad, temporary changes announced in October for the Public Service Loan Forgiveness (PSLF) program. Called the “Limited PSLF Waiver,” these changes also expanded eligibility for the PSLF program through the end of October 2022, allowing more types of loans and repayment periods to count toward student loan forgiveness. The two programs are somewhat related, as the IDR fixes may also benefit borrowers on track for PSLF.
Editor’s note: Changes to prior PSLF payment eligibility through the PSLF Waiver and IDR Adjustment have positively impacted many borrowers. Even though the PSLF Waiver is expired, the IDR Adjustment offers many of the same benefits. The IDR Waiver, or IDR Adjustment, is a one-time account adjustment to give credit for qualifying payments to borrowers on income-driven repayment plans and under PSLF.
Taken together, the Department of Education estimates that the reforms will allow tens of thousands of student loan borrowers to get near-immediate student loan forgiveness. Millions of additional borrowers will get pushed closer to the threshold for loan forgiveness, shaving off years of repayment in the process.
Although the Department of Education has published guidance for both the IDR Adjustment and the Limited PSLF Waiver, many questions have remained unanswered. The administration hasn’t addressed many nuanced situations and has provided somewhat ambiguous summaries of the new policies.
Earlier this month, however, the Department added to its existing guidance, which now sheds some more light on what may count toward student loan forgiveness under these new changes, and what may still be rejected. Here’s the latest.
Summary of the changes to PSLF and IDR
Under the Limited PSLF Waiver and IDR Adjustment, the Department of Education is temporarily waiving restrictive rules. For a limited time, the Department will be able to count the following towards a borrower’s PSLF and IDR loan forgiveness term, all of which would have been previously rejected:
- Payments made under any repayment plan, including Extended, Graduated and Alternative repayment plans that aren’t based on a borrower’s income, even if those payments weren’t made in full or on time.
- Payments made on FFEL Loans and federal Perkins Loans, provided the borrower consolidates those loans into the federal Direct Consolidation Loan program.
- Payments made prior to loan consolidation.
- Certain periods of forbearance, including 12 or more prior months of consecutive forbearance, or 36 or more months of cumulative forbearance. Shorter forbearance periods are considered on a case-by-case basis, but the borrower must petition the Department of Education and demonstrate that they were improperly steered into forbearance by their loan servicer.
- Any prior months spent in deferment, except for in-school deferments, before 2013.
These periods can be counted toward a borrower’s 120 payments required to obtain loan forgiveness under PSLF, as well as the borrower’s 20 or 25-year repayment term under an IDR plan.
Borrowers with FFEL loans would need to consolidate through the federal Direct Consolidation Loan program to benefit from the changes.
For the Limited PSLF Waiver, borrowers who must consolidate should do so before October 31, 2022, according to the Department of Education. And for the IDR Adjustment, borrowers who need to consolidate should proceed before January 1, 2023.
Updated guidance for PSLF and IDR program changes
The Education Department’s initial guidance for both the Limited PSLF Waiver and the IDR Adjustment has been somewhat limited, leading to many questions about specific, nuanced situations. But this month, the Department has provided some updates.
Periods of default still don’t count
Prior periods of default didn’t count toward PSLF or IDR loan forgiveness under the original program rules, and that remains unchanged under the new changes. According to the Department of Education, “Periods of default and in-school deferment, still do not qualify.”
Some deferment periods after 2013 might count, after all
The Department initially indicated that only deferments prior to 2013 (other than in-school deferments) could be counted toward loan forgiveness under the new changes. But FSA officials have subsequently clarified, “We will include months in Economic Hardship Deferment on or after January 1, 2013.” In addition, the Department will count time spent in specific military-related deferments.
The covid forbearance counts toward loan forgiveness, but…
Many borrowers were already aware that the ongoing Covid-19 forbearance made available under the CARES Act and subsequent extensions count toward loan forgiveness for both PSLF and IDR, in contrast to other forbearance periods.
However, the Department has also now clarified that the Covid forbearance won’t count toward a borrower’s 12-month, 36-month or less- than- 12-month exceptions. For a borrower’s earlier, non-Covid-related forbearance periods to count under the recent changes, those periods must meet the new eligibility criteria without factoring in the Covid forbearance at all.
Grace periods don’t count, unless they’re “unreasonably long”
The Department has clarified that grace periods don’t count toward loan forgiveness under the recent PSLF and IDR changes. “Grace periods are a borrower benefit that is not considered a deferment or a forbearance, so grace periods do not contribute to the deferment or forbearance exceptions,” says the Department.
“In some instances, prior servicers have reported grace periods that are unreasonably long. In these instances, [the Department] will treat any time in a grace period that is unreasonable as time in repayment.”
The Department doesn’t indicate, however, the length of a grace period that it classifies as “unreasonable.” Typically, grace periods last for six months.
Bankruptcy forbearances don’t count
Typically, when a borrower files for bankruptcy, their federal student loans would be placed in a forbearance status while the bankruptcy is pending. But the Department of Education has indicated that this type of forbearance wouldn’t count toward loan forgiveness. “Time spent in a bankruptcy status does not count as time in repayment nor does it count towards the various forbearance exceptions,” says the Department.
Darren Fitzpatrick says
I think these rules as written, as you say Adam, leave a lot of nuanced situations where it is not clear if forgiveness will be given. I for instance, seem to qualify for forgiveness a number of ways based on the new parameters- I was in forbearance for 6 consecutive years (2005-2011) while working for a qualifying institution and then made 10 years of uninterrupted payments between 2011 and 2021 (and beyond). However I no longer work for a qualifying institution so it is now unclear to me if I’ll receive forgiveness despite meeting the criteria for my loan to be forgiven.
In order to be eligible to have the periods of forbearance/deferment from the past counted towards PSLF in the new updated guidelines do we know if you had to be working with a qualified employer during those times of forbearance/deferment? I currently work for a qualified employer but at that time did not.
Abel at Student Loan Planner says
Hi TJ, correct you had to have been working at a qualifying employer.
I am currently enrolled in PSLF who consolidated my loans in 2017 but had significant periods of forbearance/deferment from 2010-2017. I will not benefit from the changes in the PSLF waiver as I was not working for a qualified employer from 2010-2017. Will the IDR adjustment benefit me in anyway if I am enrolled in
Nathalia at Student Loan Planner says
It’s difficult to say whether the IDR waiver will benefit those on PSLF. I’d love to answer you but the best thing to do is to wait for the FAQs about the IDR waiver to come out.