Borrowers have officially resumed repayment on federal student loans after a three-year hiatus. While the Biden administration implements a number of student loan forgiveness initiatives, the Education Department is also trying to ease the transition back to repayment. But borrowers are reporting widespread problems.
Those who were covered by the student loan payment pause will be protected by the “on-ramp” period until next fall. This program will protect borrowers from experiencing delinquency and default if they miss a payment. Any missed payments will be retroactively converted to a forbearance. However, many borrowers may not be aware of these flexibilities as they contend with miscalculated payments and long call hold times when trying to reach their loan servicer.
In the meantime, student loan forgiveness efforts continue on a number of fronts. Here are the latest updates.
On-Ramp Begins, But Missed Payments Won’t Count Toward Student Loan Forgiveness
During the on-ramp period, borrowers will not be considered delinquent if they miss a student loan payment, and they won’t be reported as such to national credit bureaus. In addition, borrowers will not go into default.
However, missed payments will not count toward student loan forgiveness under programs like Income Driven Repayment and Public Service Loan Forgiveness. This differs from the treatment of missed payments during the Covid-era forbearance — a distinction that borrowers need to be aware of.
Targeted Student Loan Forgiveness Efforts Continue
The Biden administration continues to implement so-called “targeted” student loan forgiveness initiatives, whereby borrowers are receiving student debt relief under a number of individual programs.
So far, more than 3.5 million borrowers have collectively received at least $127 billion in student loan forgiveness under these initiatives. These include the Limited PSLF Waiver, the IDR Account Adjustment, and the Total and Permanent Disability discharge program. It also includes hundreds of thousands of group discharges for borrowers harmed by their schools.
Important Student Loan Forgiveness Deadline Approaches
The student loan forgiveness initiatives that the Biden administration is implementing are not over. One of the most significant of those programs is the IDR Account Adjustment, which can provide substantial retroactive “credit” toward a borrower’s student loan forgiveness term under both the IDR and PSLF programs. More than a million borrowers have collectively received over $40 billion in student loan forgiveness.
While implementation of the IDR Account Adjustment is ongoing, an important deadline is approaching. Borrowers with commercially-held FFEL-program loans must consolidate those loans via the Direct loan program by December 31, 2023 in order to be eligible for loan forgiveness and the associated benefits under the account adjustment.
Education Department Introduces Buyback Option for Key Student Loan Forgiveness Program
The IDR Account Adjustment provides borrowers with the opportunity to count certain periods of deferment and forbearance toward loan forgiveness that would not have qualified before. But the adjustment is a temporary program.
Earlier this month, the Education Department unveiled a buyback option for the PSLF program. This will allow borrowers to make retroactive qualifying payments toward student loan forgiveness for certain past periods of deferment and forbearance that would not have counted. The buyback option will give borrowers more flexibility to get past periods counted toward loan forgiveness once the IDR Account Adjustment ends.
Rulemaking Proceeds For New Student Loan Forgiveness Plan
Meanwhile, the Biden administration is developing a new student loan forgiveness plan under the Higher Education Act’s “compromise and settlement” authority. This month, the Education Department identified five groups of borrowers who may ultimately qualify for relief under this new plan.
The parameters of the new student loan forgiveness program are still being worked out. The department is engaged in a rulemaking process, and the first public hearings were held earlier this month. Two more rounds of public hearings are scheduled for November and December, after which the details of the new program should be come clearer.