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Some borrowers given more time to take steps to qualify for student-debt forgiveness

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Borrowers who have been paying on their loans for decades and are hoping to receive debt forgiveness under a Biden administration initiative now have more time to get their paperwork in order. 

The Department of Education announced Monday that borrowers who need to consolidate their loans to become eligible for a debt-relief program will have until April 30, 2024 to do so. Through the initiative, known as the income-driven repayment account adjustment, the Department is making a one-time change to borrowers’ accounts, which will provide them with more credit towards debt forgiveness. Previously, the deadline was December 31, 2023. 

The Biden administration has already canceled debt for nearly 901,000 borrowers through this program, which officials announced last year. In theory, borrowers using income-driven repayment plans should have their debt forgiven after at least 20 years in repayment, but for years that debt relief proved elusive, thanks in part to servicer errors, advocates and lawsuits claim. 

In 2022, the Biden administration announced that it would review borrowers’ accounts for periods that should have counted towards forgiveness and adjust accordingly. But for borrowers to be eligible for this account adjustment they needed to have either Direct Loans or Family Federal Education Loans that are held by the Department of Education.

Borrowers with commercially-held loans and Perkins loans need to consolidate their debt into direct loans to qualify for the adjustment. Thanks to Monday’s announcement they have four more months to take that step. 

“A lot more borrowers are going to have the option to get their loans cancelled,” thanks to the deadline extension, said Persis Yu, deputy executive director and managing counsel of the Student Borrower Protection Center, an advocacy group. “What I’m hoping is that it not only gives borrowers more time, but it gives the administration more time to get the word out so that borrowers can meaningfully take advantage of what is a really incredible opportunity.” 

Officials expect to complete the account adjustment by July

The Department of Education expects to have reviewed and adjusted all of the payment counts by July 1, 2024, the agency said. Consolidating by April 30, 2024 will help eligible borrowers ensure they have access to the account adjustment. (Borrowers can fill out a consolidation application here). 

Some borrowers who have been in repayment on their loans for at least 20 years will have their loans cancelled through the program and other borrowers who have been paying on their debt for less time can still benefit from the initiative. The Department of Education will be adjusting borrowers’ accounts to provide them more credit towards the payments needed to qualify for relief. That means some borrowers who don’t have their debt fully cancelled through the account adjustment will still get closer to forgiveness.

If these borrowers want their payments to count towards forgiveness going forward following the adjustment, they’ll need to be on an income-driven repayment plan, said Betsy Mayotte, the founder of The Institute of Student Loan Advisors. (Apply for an income-driven repayment plan here). 

“If you want to count next month or you want to count the payment you make in July of 2025,” towards eventual forgiveness, you need to be on an income-driven plan, she said. 

Most borrowers don’t need to take action

For most borrowers the adjustment will happen automatically and they won’t have to take any action. But there are a few types of borrowers who will need to consolidate before the April 30 deadline to access the relief. Borrowers can log on to their student-loan portal at StudentAid.gov to get a sense if they have the types of loans that need to be consolidated in order to qualify for the adjustment. 

If you see a Perkins loan in your portal, you should consider consolidating, Mayotte said. If you have a loan that is still serviced by Navient or AES, you may want to consider consolidating to access the relief, according to the Massachusetts Attorney General’s office. 

A shortcut that can help borrowers know if they have loans that need to be consolidated to qualify for the adjustment? “If you have federal loans and you weren’t part of the federal payment pause then you probably have a commercially-held FFEL” Yu said, a type of loan that borrowers will need to consolidate to get access to the relief. 

On the flip side, it’s very unlikely that borrowers who took on their loans after 2010 have loans that need to be consolidated to qualify for the program. 

The income-driven repayment account adjustment is part of the Biden administration’s broader efforts to smooth out the pathway towards debt forgiveness for borrowers who are already eligible for relief under the law. So far, officials have announced $127 billion in cancellation for 3.6 million borrowers through these initiatives. 

This is separate from the mass debt-forgiveness plan the Supreme Court struck down in June. The Biden administration is in the midst of a process to determine the scope of the new plan, but it will likely be more targeted than the previous version. 

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