November 7, 2022

What is the IDR Account Adjustment Initiative, and How Can it Help Me?

Repayment

The Biden administration continues to make waves in the student loan space as it announced changes to qualification for PSLF and IDR plans and a one-time adjustment for PSLF and IDR borrowers.

The Latest

Adjustments to IDR (income driven repayment) plans come on the heels of the Limited PSLF waiver, which retroactively credited federal student loan borrowers for previous payments that traditionally did not qualify for PSLF. This waiver expands what payments qualify for PSLF and can potentially wipe out loans for some borrowers. 

The temporary PSLF waiver waived a few of the previous necessary qualifications. 

The administration reported that $14 billion of student loan forgiveness has been granted to 236,000 borrowers since the waiver opened a year ago.  

The deadline for this limited-time waiver was October 31, 2022. But, if you missed the deadline or don’t qualify, Biden’s latest announcement may apply to you. Announced last week, the IDR account adjustment similarly credits IDR and PSLF borrowers retroactively for payments. 

What’s the IDR Account Adjustment?

While the PSLF waiver only lasted a limited time, the administration’s announcement signals a more permanent answer to its limited-time offer. 

The waiver expired at the end of October, but the Department of Education indicated the adjustment for IDR borrowers would begin in November.

With this being another one-time adjustment, the Department of Education signaled larger permanent changes would come to PSLF in July 2023. These changes are aimed at making applying for PSLF easier so that more borrowers can qualify. 

The IDR (Income Driven Repayment) Account Adjustment will grant borrowers retroactive credit to help their previous payments count towards their 20- to 25-year repayment plans. The IDR Account Adjustment will also apply to borrowers working towards PSLF. 

If you are on an Income-Driven Repayment plan, this initiative will retroactively credit you for any month where you were in:

  • Repayment status, regardless of late payments, partial payments, loan type, or repayment plan
  • Eligible repayment, deferment, or forbearance status before consolidation
  • Forbearance (up to 36 consecutive months)
  • Deferment, prior-2013 

Previously, these payments and conditions did not count towards a borrower’s IDR plan, meaning they couldn’t qualify for their 20- or 25-year forgiveness plans. 

With this adjustment, many IDR and PSLF borrowers will be retroactively granted credit for previously unqualified payments, getting them closer to, or even granting them, forgiveness. 

Starting in November, IDR borrowers with 240 or 300 monthly payments under the new qualifications will start seeing loan discharges. Similarly, PSLF borrowers with 120 qualifying payments under the adjustment will receive forgiveness. 

IDR and PSLF borrowers will automatically see this change reflected in their accounts unless they previously opted out.    

But, if the adjustment doesn’t completely knock out a borrower’s loan, they won’t see the adjustment until 2023, explains the Department of Education: “Borrowers who receive additional credit for IDR or PSLF through the one-time account adjustment but who do not reach the required monthly payments under the programs will have their accounts adjusted in July 2023.” 

How Do I Qualify for this One-Time Adjustment?

This adjustment could benefit you if you are a borrower in an IDR plan or enrolled in PSLF.

However, only some federal student loans will qualify for the adjustment. Borrowers must hold:

  • Direct Loans
  • FFEL loans   

To qualify for the adjustment. 

If you are on IDR or PSLF and have other Department of Education loans, you must consolidate them into a Direct Loan to qualify.

Borrowers must apply for consolidation before May 31, 2023, to qualify for the adjustment. However, the department is urging borrowers to act fast, consolidating sooner rather than later to take advantage of the program. 

Tackling Debt is Tricky, But You Don’t Have to Do it Alone

The IDR Account Adjustment has the potential to make a huge impact on many borrowers. However, understanding its in and outs is complicated. 

For additional information around the changes check out The Chipper Club, a community for up-to-date information, tips, and conversation around the ever-changing student loan landscape. 

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