As of early February 2024, the US Department of Education (ED) is currently working on payment count adjustments that may apply to you if you are:
The payment count adjustment will be applied to all Direct Loans and FFEL Program loans held by ED. Accordingly, ED anticipates that these adjustments will be completed by July 1, 2024. Direct Consolidation Loans that repaid a privately held Perkins or FFEL Program loan, disbursed before the adjustment occurs, are eligible. If you have federal loans and wish to consolidate those loans, a loan consolidation application must be submitted by April 30, 2024, to allow enough time for processing (generally at least 60 days) and then benefit from the payment count adjustment.
Borrowers on an IDR plan or working toward PSLF have the remainder of their loan balances forgiven after making the required number of payments, depending on the details of their plan. However, some months may not have previously been credited toward loan forgiveness. This payment count adjustment will change whether certain payments or months are credited toward loan forgiveness, which could result in one of the following for you:
This overview does not constitute official advice regarding the payment count adjustments. You should contact your loan servicer or the ED for more information about your specific accounts.
If you have qualifying loans, you do not have to take any action at this time. ED has already started reviewing loans that have been in repayment long enough to qualify for IDR forgiveness (e.g., 20 or 25 years) and will work to reevaluate accounts every other month to determine if additional borrowers qualify for forgiveness. Borrowers who have to update the months that could qualify for PSLF will see their PSLF payment counts updated each month until ED makes a final adjustment to IDR counts in 2024. Then, ED will review all eligible loans to update the months that qualify for IDR forgiveness.
If this review means you qualify for IDR forgiveness, ED will contact you and allow you to opt out of receiving the forgiveness.
For IDR-qualifying payments for all Direct Loans and FFEL Program loans, payment count adjustments will count time toward IDR forgiveness in the following instances:
Borrowers with loans that have accumulated eligible time in repayment of at least 20 or 25 years will receive automatic forgiveness even if they are not currently in an IDR plan.
Even if you have never been on an IDR plan before, you could still benefit from this adjustment because ED is working to resolve previous issues with a lack of transparency for borrowers about the potential benefits of IDR. This payment count adjustment will count all prior periods of repayment toward IDR forgiveness, regardless of your repayment plan. If you are interested in forgiveness, once the adjustment is complete, you will need to enroll in an eligible repayment plan to continue accruing credit toward forgiveness.
Any amount forgiven as a result of the payment count adjustment will not create a federal tax liability if discharged before January 1, 2026, but you may be taxed by your state government.
ED estimates that over 3.6 million Direct Loan borrowers will receive at least three years of credit toward loan forgiveness, and many will see their loans automatically forgiven. This change could make a big difference in helping many borrowers better manage their total debt burden and achieve financial well-being.
The information in this article was gathered from the US Department of Education's website. Please visit their site for more information and Q&A about this payment count adjustment.
