IDR Waiver: How to Qualify and Get Your Loans Forgiven Faster

If you’re a student loan borrower paying back your student loans using an income-driven repayment plan (IDR plan), the Biden Administration’s IDR Waiver is a big deal. The Department of Education is using its broad authority over student loans due to the pandemic national public health emergency to provide extraordinarily generous changes to certain forgiveness programs that could get you out of student loan debt years sooner (or even immediately).

Millions of borrowers could receive hundreds of billions in student debt forgiveness under the IDR waiver. It could prove even more generous than President Biden’s student loan cancellation benefit. Let’s see why.

What is the IDR waiver?

The Department of Education enacted a Public Service Loan Forgiveness (PSLF) program Waiver. Under this program, which was announced October 2021 and expired at the end of October 2022, prior payments before consolidation count. Payments made under any repayment plan count, too, as long as you worked full-time for a non-profit or government employer during the period in question.

With the IDR waiver, the administration is trying to broaden that help to a much larger group of borrowers by giving credit towards IDR forgiveness for forbearance periods, some types of deferment and all types of repayment plans.

Like the PSLF waiver, we expect borrowers with commercially held debt with the Federal Family Education Loan program (FFEL) to need to consolidate. The deadline for consolidation to take advantage of these benefits is May 1, 2023. Due to potential legal challenges against the waiver, we would urge borrowers with commercially-held FFEL loans to consolidate immediately.

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The IDR waiver includes borrowers working in the public and private sector

The PSLF waiver only applied to borrowers in the public sector or who used to work in the public sector.

The IDR waiver applies to all borrowers. In order to receive credit for PSLF under the IDR waiver rules, you must be employed at a qualifying employer when the Department of Education makes the account adjustment to your forgiveness credit.

For borrowers not pursuing PSLF, you can receive credit towards forgiveness programs like IDR forgiveness over 20 and 25 years.

For example, if you have paid on your undergraduate loans since 2006 and work in the private sector, you could consolidate before May 1 under the IDR waiver and receive up to 16 years of credit towards 20 year forgiveness under the REPAYE plan.

You would only need to pay for four additional years on an IDR plan, and your balance could be completely forgiven.

A physician who deferred her loans during residency for four years can get all 4 of those years counted towards the PSLF program now, thanks to the IDR waiver.

These examples show how the IDR waiver could help all types of borrowers regardless of employment status.

Deferment and Forbearance Now Broadly Qualifies for Forgiveness

PSLF and IDR borrowers would receive credit towards forgiveness if they were in more than 12 months of consecutive forbearance or 36 months of aggregate forbearance.

If you have less than 12 consecutive months of forbearance or 36 months or less of aggregate forbearance, then this credit would not qualify. In this case, you need to file a complaint with the FSA Ombudsman to review your situation.

Deferment before 2013 also counts for IDR and PSLF forgiveness, excluding in-school deferment. This is because the Department cannot identify who was in economic hardship deferment and who was not. So, they’re giving credit for all types of deferments.

For deferments after 2013, you needed to be in a specific type of deferments such as active duty deferment or economic hardship deferment. Most types of deferment will qualify without a time requirement as with the forbearance 12 months consecutive / 36 months aggregate rule.

Payments made under any student loan repayment plan now qualify

The IDR waiver gives borrowers credit for any repayment plan towards IDR forgiveness, even payments made prior to consolidation.

As an example, consider a borrower who has paid her loans under the Extended Repayment Plan since 2002. She would normally receive 0 credit towards IDR forgiveness since the Extended Repayment Plan is not income based.

But under the IDR waiver, she could get credit for all those payments, and either has her loans completely forgiven or be very close to forgiveness.

Related: How to know if a student loan consult is right for you?

Payments made before consolidation now qualify

Borrowers who made payments pre-consolidation can now get credit, too. We expect a similar process to the PSLF waiver, where borrowers can get credit for the loan with the most amount of monthly payments applied to their overall consolidation loan.

If that happens, many borrowers would be able to consolidate older loans along with graduate degree loans and get much faster credit toward forgiveness overall.

Who needs to take action: Borrowers with certain types of FFEL loans

Borrowers with commercially-held FFELP loans probably need to consolidate before the deadline to qualify for the IDR waiver.

This is because program requirements prevent the Department of Education from granting credit automatically on this type of loan.

If you were still required to make payments during the student loan payment pause despite your student debt showing up on the Federal Student Aid website, StudentAid.gov website, then you have this kind of student loan, and you need to consolidate to receive credit under the IDR waiver.

A lawsuit could block this benefit for borrowers with this type of loan, so you should consolidate immediately if you want to secure this IDR waiver benefit if you have commercially-held FFELP loans.

Will the IDR waiver result in immediate forgiveness for millions?

According to NPR, 4.4 million borrowers have been in repayment for at least 20 years. This is the minimum threshold to receive IDR forgiveness. Most of these borrowers would not qualify for Pay As You Earn. Therefore, most would probably have to seek forgiveness under the REPAYE rules, which allow for forgiveness after 20 years for undergraduate loans and 25 years for graduate loans.

According to the Department of Education, “several thousand borrowers with older loans will also receive forgiveness through IDR. More than 3.6 million borrowers will receive at least three years of additional credit toward IDR forgiveness.”

Saying “several thousand borrowers” and “at least three years of additional credit” is a huge understatement. We believe the Department is being cautious publicly on how much the program could save borrowers in case it were to draw legal opposition.

You should know that millions of borrowers could receive complete cancellation of their student loans thanks to the IDR waiver. Until 2026, any cancellation is free from any federal taxation as well. A handful of states (perhaps four) could impose state income tax, so consult with a tax advisor about this aspect.

Could the IDR waiver be subject to legal challenge?

The 118th Congress is scheduled to be sworn in on January 3, 2023. The PSLF waiver did not face resistance legally. This could be in part due to sympathetic stories from service members featured on programs such as 60 Minutes, who were denied benefits under the program.

Most of the benefits of the IDR waiver will be given out in 2023 under a new Congress. Could that Congress sue to block aspects of this program? That’s a serious possibility with the House of Representatives changing hands to the GOP.

We think borrowers with commercially-held FFEL loans have the most to lose, as a lawsuit could block their access to this program. Other borrowers can likely feel more secure knowing the PSLF waiver provided over $15 billion in benefits without succumbing to legal challenges.

Get the Most Out of the IDR Waiver for Your Situation

This IDR waiver could potentially accomplish a very large amount of debt cancellation. Some of that cancellation will be immediate, but much of it will also occur over the next several years as borrowers hit their 10, 20, and 25 year forgiveness counts depending on what program they’re eligible for.

While many borrowers will see their accounts updated in July 2023, if you could obtain forgiveness under the IDR waiver before then, your application could be processed much sooner.

For example, if forbearance and deferment along with your payments puts you above 120 months needed for the PSLF program, you could fill out the PSLF ECF form and check that you believe you qualify immediately. You could follow a similar process for 20 or 25 year IDR forgiveness, but with only a consolidation.

What’s clear is that the IDR waiver creates a massive number of opportunities for borrowers to save money, and most borrowers are unaware of the possibilities for savings if you understand all the rules.

If you need help optimizing your loan repayment strategy under the IDR waiver, we’d love to help. Just check out our paid consult service on that page. In many cases, our team of experts will find you a large multiple of our consult fee in projected savings.

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