Department of Education Announces Changes to Income-Driven Repayment Forgiveness Criteria

Updated on January 26, 2023

The Department of Education is making changes to the criteria for income-driven repayment forgiveness. Beginning in spring 2023, borrowers who have been repaying their federal student loans for 20 or more years will have the remaining balance of their debt discharged. Learn more about the changes and how they may affect your student loan repayment options.

Questions Answered in this Article

Who will see their loans discharged entirely? Answer: The first group of borrowers to be affected will be those with the oldest loans- those who have spent at least 240 months repaying their loans, they will have their debt wiped clean.
Is any action required on my part? Answer: The recount should be automatic, but some borrowers may need to take steps to benefit from the changes: FFELP borrowers with commercially held loans must consolidate. Public Service Loan Forgiveness-seeking borrowers must apply for PSLF. Some borrowers may need to enroll in income-driven repayment.
What will be considered for IDR forgiveness? Answer: The IDR payments review is expected to result in loan discharges for Borrowers who have made 20 or 25 years of payments (240 and 300 monthly payments, respectively), under any payment plan. Borrowers who submitted a PSLF application prior to Oct. 31, 2022, and who reach 120 payments as a result of changes to deferment qualifications.
How long will borrowers have to consolidate their loans? Answer: Borrowers with commercially held loans must consolidate by May 1, 2023, to be included.
When will the changes take effect? Answer: The one-time fixes will begin to take effect in the spring, targeting the oldest loans first, but they are expected to cover all federal loans by the summer of 2023.

New IDR Forgiveness Criteria Announced by the Department of Education

The Department of Education is reviewing the criteria for income-driven repayment forgiveness. Beginning in spring 2023, borrowers who have been paying their federal student loans for 20 or more years will have the remaining balance of their debt discharged. Additionally, many more borrowers will be closer to forgiveness. Originally, the Education Department planned to begin providing this relief in November 2022.

Income-driven plans provide reduced payments over 20-25 years, followed by forgiveness of the remaining balance. These plans were created in the 1990s to assist borrowers facing financial difficulties by basing payments on income rather than the balance owed.

These changes are a result of a new IDR waiver announced by the Biden administration in April 2022. The waiver changes the rules on which payments count toward forgiveness and now every month spent repaying student loans or on pause since leaving school will count toward forgiveness, but only once.

The Department of Education estimates that 40,000 borrowers with older loans will see their balances wiped clean starting in the spring, and more than 3.6 million borrowers are expected to receive at least three years of additional credit toward IDR forgiveness. However, some student loan experts believe the impact of the changes could be even greater than that.

MORE: Student Loan Forbearance Extension: What You Need to Know

Eligibility for Forgiveness Expanded for Federal Student Loan Borrowers

The first group of borrowers to be affected will be those with the oldest loans- those who have spent at least 240 months repaying their loans, they will have their debt wiped clean.

Forgiveness through older income-driven repayment plans has been difficult in the past. As of March 2021, only 32 borrowers had ever seen their debt forgiven despite decades of payments, according to a study by the National Consumer Law Center and the Student Borrower Protection Center.

The one-time fixes will begin to take effect in the spring, targeting the oldest loans first, but they are expected to cover all federal loans by the summer of 2023.

“This change is giving credit for every year a borrower has been in repayment, regardless of whether payments were based on their income or not,” says Betsy Mayotte, president and founder of the Institute of Student Loan Advisors.

MORE: Student Loan Forgiveness: US Cancels Another $2B In Debt

Action Required for Some Borrowers to Benefit from Changes

The recount should be automatic, but some borrowers may need to take steps to benefit from the changes:

FFELP borrowers with commercially held loans must consolidate. To be eligible for the recount, borrowers must have direct loans. This means borrowers with commercially held loans must consolidate by May 1, 2023, to be included.
Public Service Loan Forgiveness-seeking borrowers must apply for PSLF. Borrowers who work in public service and have not already applied by Oct. 31, 2022, must submit an employment certification form and PSLF application by May 1, 2023, in order to have the adjustment count towards PSLF. If they have payments remaining after the review, they will need to enroll in an IDR plan.
Some borrowers may need to enroll in income-driven repayment. Federal borrowers whose debts are not discharged in the spring will see their past payments reviewed in July. If they are already enrolled in IDR, the number of payments that count towards forgiveness will be adjusted. But if they are not, they will have to decide whether to enroll in IDR and take advantage of the recount. Payments they make after July will not count if they do not enroll.

“If they’re not going on an IDR plan, then they will not accrue IDR payments,” says Mayotte. “Forgiveness isn’t the goal; the goal is to pay the least amount over time. For some people, paying their balance off aggressively is going to cost them less rather than continuing to pursue an income-driven plan. Borrowers need to do the math on that.”

Considerations for IDR Forgiveness and Repayment Plan Options

The IDR payments review is expected to result in loan discharges for:

Borrowers who have made 20 or 25 years of payments (240 and 300 monthly payments, respectively), under any payment plan.
Borrowers who submitted a PSLF application prior to Oct. 31, 2022, and who reach 120 payments as a result of changes to deferment qualifications are outlined below.

Here’s what to expect to be counted as a qualifying payment under the one-time review:

Any month a borrower was in repayment, regardless of partial payments, late payments, loan type, or repayment plan.
Any month that loans were in an eligible repayment, deferment, or forbearance status prior to consolidation.
Any month a borrower’s loan spent in 12 months of consecutive forbearance.
Any month a borrower’s loan spent in at least 36 cumulative months in forbearance.
Any month spent in deferment, except in-school deferment, prior to 2013.

In July 2023, the Education Department plans to automatically apply the above payment count rules to all federal direct and government-owned Federal Family Education Loan Program loans. Those with privately-held FFELP loans must consolidate their debt into a new direct loan in order to have past payments counted.

MORE: How Income-Driven Repayment Plans Can Help You Manage Your Student Loan Payments

Summary

The Department of Education is reviewing the criteria for income-driven repayment forgiveness, beginning in spring 2023.
Borrowers who have been paying their federal student loans for 20 or more years will have the remaining balance of their debt discharged.
Many more borrowers will be closer to forgiveness as a result of changes announced by the Biden administration in April 2022.
Income-driven plans provide reduced payments over 20-25 years, followed by forgiveness of the remaining balance.
These plans were created in the 1990s to assist borrowers facing financial difficulties by basing payments on income rather than the balance owed.
The Department of Education estimates that 40,000 borrowers with older loans will see their balances wiped clean starting in the spring.
More than 3.6 million borrowers are expected to receive at least three years of additional credit toward IDR forgiveness.
The one-time fixes will begin to take effect in the spring, targeting the oldest loans first, but they are expected to cover all federal loans by the summer of 2023.
Borrowers with commercially held loans must consolidate by May 1, 2023, to be included.
Public Service Loan Forgiveness-seeking borrowers must apply for PSLF and submit an employment certification form by May 1, 2023.
Federal borrowers whose debts are not discharged in the spring will see their past payments reviewed in July.