The Consumer Financial Protection Bureau is urging eligible borrowers to take advantage of the opportunity to have their entire student-loan debt canceled before April 30, when the option will no longer be available.
The Biden White House, which has made fixing historical failures in the administration of student loans one of its goals, announced in April 2022 a one-time account adjustment for longtime borrowers that would require the U.S. Department of Education to reconsider what counts toward income-driven repayment forgiveness.
Normally, IDR plans, created in the 1990s, would offer reduced payments after 20 or 25 years of borrowers repaying their debt, but because of persistent mismanagement, many have not seen the relief they should have.
The Biden administration's IDR Account Adjustment seeks to address this issue by allowing longtime borrowers to receive retroactive credit toward their loan forgiveness under the income-driven repayment and Public Service Loan Forgiveness plans by changing which payments count toward these programs. The PSLF erases any remaining debt after 10 years of payments.
Longtime borrowers eligible to benefit from this temporary program would see their debt completely erased if they have reached the necessary threshold. If they have not, they would receive credits to get them closer to that milestone.
In November, the White House said about 813,000 federal student-loan borrowers received an email from President Joe Biden saying their debt had been forgiven. In December, the U.S. Department of Education wrote that since summer 2023, it had approved "almost $44 billion in debt relief for more than 900,000 borrowers as part of the payment count adjustment."
The department estimated that the Biden administration had until then brought overall forgiveness to $132 billion for over 3.6 million borrowers. According to an update from the White House published February 21, the Biden administration has now canceled almost $138 billion in student debt for almost 3.9 million borrowers.
What You Need to Know
Those eligible to benefit from the one-time adjustment are longtime borrowers whose loan is federally managed. The program considers loan payments made after July 1, 1994, as well as deferments, economic hardship and forbearances.
While most borrowers with direct loans will receive the associated IDR student-loan- forgiveness credit associated with the one-time adjustment automatically, others may need to consolidate their loans through the Federal Direct Loan Program to qualify for the adjustment.
These include borrowers with multiple federal loans, commercial Federal Family Education Loans and other non-direct federal loans.
Those borrowers should call the Education Department at 1-800-433-3234 or log in to their StudentAid.gov accounts. There is time until April 30 to consolidate your loan into a Direct Consolidation Loan. (Here is the application.) This would make borrowers eligible for the one-time adjustment.
Those who get their loan balance forgiven may also be eligible for refunds if they have overpaid.
It is possible for borrowers to continue building credit toward loan forgiveness after the deadline of April 30 by enrolling in an IDR program. You can apply here.
The U.S. Department of Education said it expects the one-time adjustment to be completed by July 1.
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
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Giulia Carbonaro is a Newsweek Reporter based in London, U.K. Her focus is on U.S. and European politics, global affairs ... Read more
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