IDR One-Time Adjustment and Forgiveness Program Extended

IDR One-Time Adjustment ExtensionThe Department of Education (DOE) announced that the IDR One-Time Adjustment Program was extended through April 30, 2024.  It was to expire on December 31, 2023.  This extension is good news for many long-term borrowers who have missed the Limited Waiver Program deadline.  These borrowers may still qualify for these loan forgiveness credits.

The IDR One-Time Adjustment was a program to help borrowers earn loan forgiveness credits who had the wrong types of loan or received misinformation due to the complexities of the Income-Driven Repayment (IDR) Methods.  It was an extension of the original Limited Waiver Program that expired on October 31, 2022.

The Limited Waiver and IDR One-Time Adjustment programs are the government’s most successful loan forgiveness programs.  According to the Department of Education, these programs have provided loan forgiveness to nearly 3.6 million borrowers, totaling nearly 132 billion dollars.

Who Qualifies for the IDR One-Time Adjustment?

The borrowers who will benefit the most from the IDR One-Time Adjust will be those over 30.  Younger borrowers could benefit but the impact will be substantially less.  They do not have an extended payment history to earn credits through this adjustment.

For borrowers who had student loans before July 1, 2010, you also have a probability of benefitting from the IDR One-Time adjustment.  You are more likely to have FFEL loans, which most likely do not qualify for many loan forgiveness programs.  Under the IDR adjustment program, your FFEL loans must be converted to Direct Federal through a Direct Consolidation.  At that point, you will qualify, and your payment months will be credited to the FFEL loan payment periods.

Some borrowers who were in default or forbearance could also earn payment credit for those months.  Depending on the situation, a borrower could earn credits if they enrolled in the Fresh Start program.  You will need to contact your loan servicer since the type and timing of these exceptions are very specific.

What is an IDR One-Time Adjustment?

The IDR One-Time Adjustment program allows borrowers to earn payment credit months toward one of the loan forgiveness programs.  Due to the complexities of the rules and misunderstood advice, the federal government has tried to correct these errors.

The IDR One-Time Adjustment was to expire on 12/31/2023.  The new expiration date is  4/30/2024.  According to the Department of Education, over 3.4 million borrowers could still qualify and benefit from this program.

By earning these additional credits, borrowers could earn additional credit months to get them closer to Public Service Loan Forgiveness (PSLF) or the End-Term Forgiveness.  These extra credit months could be crucial for borrowers using the End-of-Term forgiveness, which is usually taxable under the IRS rules.  Due to the CARES Act, all student loan forgiveness through 12/31/2025 is tax-free.

Getting the right advice from a trained professional is critical.  PayForED has a list of advisors that have training in this area.

Parent PLUS and IDR One-Time Adjustment

A growing number of students and parents are struggling with Parent PLUS loans.  People over 50 are the fastest-growing group of student loan borrowers.  Many newly created programs excluded or limited Parent PLUS loans from benefitting under the changes.

According to the IDR One-Time Adjustment rules, certain Parent PLUS loans qualify and could receive credited payment months if they do the direct consolidation by April 30, 2024.  This improvement could be highly beneficial if the parent has worked Full-Time for a government agency or 501c3 company since their credit months may help them qualify for PSLF.  The rules for PSLF require only 120 months of payment credits.

These credits are a significant advantage if you have yet to reach the 120 credit months.  You will receive some qualifying payment months and shorten your period to forgiveness.  If you properly use the consolidation rules, you could take advantage of the double consolidation rules.  As a result, this reduces your future payment by 50%.  This strategy requires additional planning and is more complex.  It also expires on June 30, 2025.

Jointly Consolidated Loan Can Benefit

This type of FFEL Loan is another example of where older FFEL loans could be beneficial.  Married couples were able to consolidate their student loans together.  That program ended in the late 1990’s due to program problems like divorce.  These loans could only be separated once done if one of the spouses declared bankruptcy.  It was also an expensive process.

A new program called the Joint Consolidation Loan Separation Act has changed that process.  This new program allows jointly consolidated borrowers to separate these joint loans more efficiently.  This new act is highly beneficial if one spouse qualifies for PSLF and has the credit months to qualify for PSLF.

This program is still being rolled out through 2024 but will work with the IDR One-Time Adjustment according to the Department of Education rules.

IDR One-Time Adjustment Extension Conclusion

According to the DOE, over 3.4 million borrowers still could earn credits for loan forgiveness.  We have seen the benefit of the previous programs.  Borrowers who took our advice and correctly submitted their forms benefited greatly.  Our average savings for the Limited Waiver Program was over $120,000 per borrower.

This new deadline is an excellent opportunity to investigate and take advantage of this government extension.  As repayment has restarted many borrowers are struggling with this new added expense.  By getting the proper advice, you can lower your payment, get closer to forgiveness or even get your loans forgiven.

Another issue that borrowers need to be aware of is the processing time.  The DOE is estimated to complete the processing by July 2024.  I expect delays as previous programs have yet to be completed by the estimated deadline.  Keep checking back with PayForED to keep you updated.

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