39K Student Loan Borrowers Just Got Forgiveness. Here’s How To Get in Line
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The Education Department is extending a key student loan forgiveness deadline and delaying the relief rollout.
Borrowers now have through June 30 to consolidate certain types of federal student loans to qualify for the one-time income-driven repayment (IDR) account adjustment, which counts more past periods of repayment toward IDR forgiveness. The account adjustment will be fully implemented in borrowers’ accounts sometime in September.
So far, the Education Department has approved roughly $51 billion in IDR account adjustment forgiveness for more than one million borrowers — including a recent wave of $1.9 billion in forgiveness for 39,200 longtime borrowers, announced on May 22.
The new consolidation deadline lengthens the program’s timeline by two months. Previously, the consolidation deadline was April 30, and the account adjustment was slated to wrap up by July 1.
“The department is working swiftly to ensure borrowers get credit for every month they’ve rightfully earned toward forgiveness,” U.S. Under Secretary of Education James Kvaal said in a statement.
Though the delay means a second chance for borrowers who didn’t consolidate by the previous deadline, it may also mean the Education Department is buying itself some time to finish implementing the forgiveness, says Karen McCarthy, vice president of public policy and federal relations at the National Association of Student Financial Aid Administrators.
“They don't expect to finish their work as early as they thought they were, so the window to apply to consolidate into the [direct loan] program has now been extended a little bit as well,” McCarthy says.
These types of loans require consolidation by June 30 to qualify for the maximum benefits of the IDR account adjustment:
Commercially held FFELP loans. (These are part of the Federal Family Education Loan Program; most federal student loans taken out prior to 2010 fall into this category.)
Federally held FFELP loans, but only if you're working toward Public Service Loan Forgiveness (PSLF).
Parent PLUS loans in repayment for less than 25 years (or 10 years, if eligible for PSLF).
Direct loans with different past payment counts.
If your loans aren’t on this list, you likely don’t need to take action to benefit from the IDR account adjustment — you’ll automatically get forgiveness either by the end of September, or sooner than you otherwise would.
“Without this extension, millions of borrowers who could benefit from the IDR account adjustment will be cut off from relief. For many, this extension could make the difference between being debt-free and years of additional payments,” says Persis Yu, deputy executive director and managing counsel at the Student Borrower Protection Center, a nonprofit organization that advocates for student debt relief.
Don’t count on another deadline extension. If you need to consolidate your loans to benefit from the IDR account adjustment, here’s how to do it by June 30.
Check your loan types
Confirm which types of loans you have before attempting to consolidate.
“The really challenging part for some borrowers is the first step in identifying all of the loans that you want to be included in the consolidation and who those loan holders are,” McCarthy says.
To start that first step, log in to your StudentAid.gov account. Once logged in, select “loan breakdown” from your dashboard to see a list of your loans, along with their names and servicers. If the loan says “Direct,” it’s a direct loan. If you have a different loan type, “FFELP,” “Perkins” or “HEAL” may be in the name. You can also see how long you’ve been paying your loans, and how much you owe.
If your servicer name starts with “Dept. of Ed” or “Default Management Collection System,” your FFELP loans are held by the government — not a commercial lender — so you don’t have to consolidate, unless you’re pursuing PSLF.
If your FFELP loans do not include either of those terms, they are commercially held and you must apply to consolidate by June 30 to get credit for IDR forgiveness.
Complete the consolidation application
The free consolidation application is available online at StudentAid.gov/loan-consolidation. When logged in, this online form will automatically populate most borrowers’ contact and loan information. Confirm accuracy. Next, you’ll be prompted to:
Select which federal loans you want to consolidate.
Preview the amount of your new direct consolidation loan and its interest rate.
Choose a repayment plan, even if you’ll be eligible for forgiveness. (If you aren’t eligible for forgiveness now, you’ll want to sign up for an IDR plan going forward to keep earning credit toward forgiveness. The form will direct you to the IDR application, which requires you to input or recertify your income information.)
Choose a federal student loan servicer for your consolidation loan.
Provide contact information for two references who can be contacted if the Education Department is unable to reach you.
The entire process can take less than 30 minutes, and it does not need to be completed in one sitting. For assistance or to apply for consolidation over the phone, contact the Federal Student Aid Information Center at 800-433-3243.
The loans you consolidate will be paid off and replaced with a single “direct consolidation loan.” The Education Department says most consolidation loans are disbursed to borrowers within 60 days of applying.
“It does take a little bit of time for the consolidation to go through,” McCarthy says. “Make sure that you understand that it will take some time, because the Department of Ed is literally paying off your previous loans.”
After consolidation, your payment count may temporarily show as zero in your StudentAid.gov account. Don’t worry: Your payment count will be accurately updated by September.
Sign up for an IDR plan if you don’t get forgiveness
If you’ve been in repayment long enough to qualify for IDR forgiveness, and you consolidate if needed, your remaining balance will be erased by the end of September and you won’t have to make further student loan payments.
Generally, you must have the following repayment history to qualify for forgiveness under the IDR account adjustment:
At least 10 years of repayment, if you qualify for PSLF.
At least 20 years of repayment, if you have undergraduate loans only.
At least 25 years of repayment, if you have loans for graduate school or parent PLUS loans.
You could also get forgiveness after 10 years of repayment if you originally borrowed $12,000 or less, as a result of the new IDR plan, called SAVE. You must enroll in SAVE to qualify for this accelerated forgiveness.
Even if you think you’ll reach forgiveness after the adjustment in September, it’s a good idea to make payments in the meantime. Any overpayments made after consolidation will be refunded.
If you haven’t spent the required amount of time in repayment, you must enroll in an IDR plan, like SAVE, to continue making progress toward IDR forgiveness. You’ll be much closer to forgiveness after the account adjustment, because it will count more past repayment periods — including forbearances and payments not made on an IDR plan — toward the time needed to earn IDR forgiveness.
Know the implications of consolidation
Consolidation is irreversible, so consider the pros and cons of consolidation before taking this action. Outside of the IDR account adjustment, consolidating certain types of loans can open the door to PSLF and IDR plans that can shrink your monthly bills. It can also simplify your payments if you have loans with multiple servicers. On the other hand, the process could lengthen your repayment period, which could increase the amount of interest you pay over time.
The following loan types require additional considerations, ahead of the June 30 consolidation application deadline.
Perkins loans
Think twice before consolidating your Perkins loans if you’re eligible for Perkins loan cancellation, which can forgive your debt if you work a public service job for at least four to seven years — much faster than PSLF or IDR.
HEAL loans
The government shuttered the Health Education Assistance Loan (HEAL) Program in 1998, but some borrowers are still repaying old HEAL debt. Unconsolidated HEAL loans aren’t eligible for IDR plans or the account adjustment.
If you consolidate a HEAL loan by June 30, your new consolidation loan will get credit toward IDR forgiveness for the oldest non-HEAL loan it includes.
If you have HEAL loans only, you should still consolidate them if you want to access IDR plans or PSLF. After consolidation, your IDR forgiveness clock will start at zero.
Parent PLUS loans
If you’ve been repaying parent PLUS loans for at least 25 years (or 10 years if you, the parent, are eligible for PSLF), you should automatically get forgiveness of your remaining debt under the IDR account adjustment. You don’t need to consolidate.
If you’ve been in repayment for close to 25 years, but you’re not there yet, consolidate by June 30 to get IDR credit for past periods of repayment for the oldest underlying loan. To keep making progress toward forgiveness, you must enroll in the Income-Contingent Repayment (ICR) plan, which is the only IDR option for consolidation loans containing parent PLUS loans.
Consider consolidation carefully if you’re far from the 25-year finish line; the ICR plan could increase your monthly bills. Use the Education Department’s loan simulator to gauge different repayment scenarios.
