One-Time Payment Count Adjustment for Eligible IDR Borrowers

Permanent Fixes to IDR Payment Counting

One-Time Payment Count Adjustment for Eligible IDR Borrowers

As part of this initiative, ED will conduct a one-time adjustment of IDR-qualifying payments for all William D. Ford Federal Direct Loan (Direct Loan) Program and federally owned Federal Family Education Loan (FFEL) Program loans. ED will conduct a one-time account adjustment to borrower accounts that will count time toward IDR forgiveness, including:

• any months in a repayment status, regardless of the payments made, loan type, or repayment plan; 12 or more months of consecutive forbearance or 36 or more months of cumulative forbearance; months spent in economic hardship or military deferments after 2013; months spent in any deferment (with the exception of in-school deferment) prior to 2013; and any time in repayment on earlier loans prior to consolidation of those loans into a consolidation loan.
• Any borrowers with loans that have accumulated time in repayment of at least 20 or 25 years will see automatic forgiveness, even if those borrowers are not currently on an IDR plan.
• Borrowers who have commercially managed FFEL, Perkins, or Health Education Assistance Loan (HEAL) Program loans should apply for a Direct Consolidation Loan by the end of 2023 to get the full benefits of the one-time account adjustment.
• In many cases, if borrowers made qualifying payments that exceed the applicable forgiveness period (20 or 25 years), those borrowers will receive a refund for their overpayment.
• ED will provide more information about how this process will work for joint (spousal) consolidation loans as it implements the Joint Consolidation Loan Separation Act.
• Borrowers with loans in default can benefit by getting out of default—including through the Fresh Start initiative—before the account adjustment. Time in default will not be counted toward IDR.

Effects on Public Service Loan Forgiveness (PSLF) Applicants & Estimate of Overall Impact

• If you have applied or will apply for PSLF, these changes may have an impact on you by increasing your qualifying payment count.
• If you have 12 or more months of consecutive forbearance or 36 or more months of cumulative forbearance, you will receive PSLF credit for those periods of time if you certify qualifying employment.
• These changes will be applied automatically to all PSLF-eligible Direct Loans, including consolidated and unconsolidated parent PLUS loans. If you believe you might benefit, you should update your employment certification history to reflect all periods of public service employment.
• Borrowers with commercially or federally held FFEL loans who consolidate those loans into Direct Consolidation Loans before the account adjustment is applied will also get PSLF credit.
• More than 3.6 million borrowers will receive at least three years of credit toward forgiveness under IDR.
• Also note that any debt forgiven as a result of the one-time IDR account adjustment will not create a federal tax liability for you. The American Rescue Plan Act included a provision temporarily modifying the tax treatment of discharged student loan debt. Specifically, the law excludes from gross income qualifying student loans that are discharged between December 31, 2020, and January 1, 2026. During this period, the amounts of forgiven student loan debt will not be subject to federal taxation. However, the amount of the forgiven loan could be taxable in some states.