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"Federal Government Adjusts Student Loan Payment History, Nearing Debt Forgiveness for Millions"

Updated: May 10, 2023

US Education Department has provided further details on its plan to adjust the payment histories of millions of student loan borrowers, getting them closer to debt forgiveness. The one-time payment adjustment announced in April 2022 counts certain months that were previously ineligible towards student loan discharge under income-driven repayment plans (IDRs). Around 3.6 million borrowers will receive at least three years of credit towards loan discharge as a result of the adjustment. The Education Department clarified this month that the adjustment will look at loans in repayment since July 1, 1994, that are still owed by the borrower or included in a consolidation loan by the borrower. Borrowers with William D. Ford Federal Direct Loan (Direct Loan) Program and federally-owned Federal Family Education Loan (FFEL) Program loans are eligible. However, time in default will not be counted toward IDR, and borrowers must use the government's Fresh Start Program to become in good standing and take advantage of the one-time payment adjustment. The new deadline is December 31, 2023.

In addition, the Education Department has extended the deadline for consolidating commercially-held FFEL, Perkins, or Health Education Assistance Loan (HEAL) with Federal Student Aid to become eligible for the adjustment until December 31, 2023. This gives more borrowers the opportunity to take advantage of this one-time payment adjustment.

It's important to note that the adjustment will happen automatically for most borrowers, unless your loans are in default or you have commercially-held FFEL loans. Beware of scams and fraudulent companies claiming to offer assistance with the one-time payment adjustment or any other form of federal loan forgiveness or discharge. You do not have to pay to receive federal loan forgiveness, discharge, or the one-time payment adjustment.

After the one-time payment adjustment is applied, your federal student loan account will be credited with additional months towards loan discharge, depending on the particular IDR plan you are enrolled in. If you have reached 20-25 years of repayment, your remaining balance will be discharged. If you have been in repayment for longer than your IDR plan, you will likely receive a refund.

For borrowers in default, there is still an opportunity to use the Fresh Start Program to become in good standing and take advantage of the one-time payment adjustment until December 31, 2023. Time in default is not normally counted toward IDR or PSLF, but borrowers who get out of default during Fresh Start will receive credit from March 2020 through the date they leave default.

Overall, the one-time payment adjustment is a significant move by the federal government to provide relief to millions of student loan borrowers. While it is separate from the president's up to $20,000 in student loan forgiveness, it will still benefit a large number of borrowers and bring them closer to debt discharge under IDR plans. If you are eligible for the adjustment, be sure to take advantage of it before the deadline.

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