By Kyra Taylor, National Consumer Law Center and Winston Berkman-Breen, Student Borrower Protection Center
This blog is the second post in a three part series about the IDR Account Adjustment and the continued flexibilities available to borrowers seeking Public Service Loan Forgiveness. Information about the IDR Account Adjustment is available in the first post here and the third post here.
From 2021 until October 31, 2022, the Department of Education implemented a limited waiver of some of the requirements for Public Service Loan Forgiveness (PSLF) to make it easier for borrowers who worked in qualifying public service to reach cancellation after 120 qualifying months of repayment. The limited PSLF waiver extended PSLF credit for past time that wouldn’t normally qualify for PSLF forgiveness and temporarily waived other requirements of the program. Borrowers who submitted an employer certification form or completed the PSLF Help tool while the waiver was in effect before October 31, 2022, will receive the full benefits that were available during that time.
Although the Limited PSLF Waiver has expired, the IDR Account Adjustment in effect now will help public service workers qualify for complete student loan debt cancellation through the federal Public Service Loan Forgiveness (PSLF) program. This is because PSLF requires public service workers to make payments on their loans on either the 10-year standard repayment plan or on one of the IDR plans. By retroactively treating all time in repayment as IDR credit, the Account Adjustment makes all past time in repayment qualify for PSLF forgiveness. The Account Adjustment will also allow borrowers to count certain time in forbearance and deferment toward PSLF because, as discussed above, that time will also be treated as IDR credit.
In many ways, the IDR Account Adjustment works to extend the Limited PSLF Waiver. Borrowers who did not apply by the October 31 Waiver deadline can still receive almost all of the same benefits through the Account Adjustment.
The IDR Account Adjustment only provides credit to Department-held loans. However, it allows borrowers with FFEL or Perkins loans held by third parties to receive credit for the time that accrued on those loans if the borrower consolidates them into a Department-held Direct Consolidation Loan before April 30, 2024 (updated from the original deadline of December 31, 2023). Additionally, borrowers who have HEAL loans held by third-parties can receive IDR credit on those loans if they consolidate them before April 30, 2024 (updated from the original deadline of December 31, 2023) with a Direct or FFEL loan that already accrued some IDR-eligible time (for more information, see the Department’s FAQ here).
This deadline is also critical for borrowers pursuing PSLF forgiveness who have Perkins, FFEL, or HEAL loans-regardless of whether they are held by the Department or held by a third-party. These loans are not eligible for PSLF cancellation unless they are consolidated into a Direct Consolidation Loan. For this reason, it is critical for borrowers to determine whether they need to consolidate their loans before the April 30, 2024, deadline in order to benefit from the Account Adjustment. Unlike the Waiver, there is no deadline by which public service workers must certify their employment to receive PSLF credit.
Importantly, Parent PLUS Loan borrowers—federal student loans taken out by parents to pay for their child’s education—are eligible to benefit from the Account Adjustment and to count those IDR credits toward PSLF if they work in public service. This is especially important for these borrowers, as they were not eligible for the earlier PSLF Waiver, and can act now to receive those benefits. Unfortunately, Parent PLUS Loan borrowers should be aware that once they consolidate their loans they will only be eligible for the Income Contingent Repayment Plan (ICR) within the IDR plans, which is the most expensive of the plans. For borrowers who are close to the 120 payments needed for PSLF cancellation, or who are close to the 20 or 25 years for cancellation through IDR, this may not be an issue. But borrowers who plan to make several years of IDR payments in order to qualify for cancellation should confirm that an ICR plan payment will be affordable to them. More information on the various IDR plans is available here.
Note: The Account Adjustment differs from the earlier Limited PSLF Waiver in two important ways. First, for all borrowers, the Waiver temporarily ended the requirement that borrowers maintain public service employment at the time their loans are forgiven. That rule is now in effect, which means that even if a borrower receives enough PSLF credit for cancellation through the Account Adjustment, they will not be eligible for cancellation if they are no longer working full-time in public service. If they return to full-time public service in the future, they will then be eligible for cancellation. Second, normally teachers seeking debt cancellation under both the Teacher Loan Forgiveness program and PSLF, each of which requires qualifying work, cannot count the same period of work toward both programs. This restriction was lifted during the Waiver, but is back in effect now.
