Students in America avail of various student loan plans to finish a college degree. One of these plans is the income-driven repayment or IDR plan. The IDR plan is a cap on the monthly payments based on the borrower’s income and family size. For instance, if your income is quite low, your monthly due could be as low as $0.
Depending on your chosen IDR, the remaining balance might be forgiven after 20 to 25 years of repayment.
President Joe Biden has been advocating loan forgiveness as he started his term. The Department of Education (ED) announced on April 19, 2022, that they made changes and updates to bring borrowers of IDR plans closer to forgiveness.
Education Secretary Miguel Cardona said borrowers of Direct Loans and Federal Family Education Plan Loans could avail of the Income-Driven Repayment or IDR One-Time Adjustment plan. (Photo: Forbes)
Also Read: New Revised Pay As You Earn: Uncertain Student Loan Forgiveness
The Consumer Financial Protection Bureau revealed that ED would make a one-time adjustment by July 2023. The IDR one-time adjustment aims to count any month spent in repayment, some forbearance periods toward loan forgiveness, and some deferment periods (before 2013). According to Yahoo! Finance, the one-time payment adjustment would reverse some of the damage caused by loan providers that did not properly track deferments or steered borrowers to forbearance instead of income-driven repayment plans.
These changes would be pleasant news to some borrowers, especially those who have been in repayment for more than 20 to 25 years. The following criteria are counted towards the IDR forgiveness.”
More than 12 months of consecutive forbearance or over 36 months of cumulative forbearance;
- Any months with time in repayment status – regardless of the loan type, repayment plan, or payments made;
- Months in deferment period before 2013, except in-school deferment; and
- Any time in repayment before the consolidation on consolidated loans.
Borrowers with over 240 to 300 months of payments for IDR forgiveness are expected to start to see their loans forgiven in spring 2023.
See: The US Supreme Court Considers the Future of Student Loan Forgiveness
What loans eligible for the IDR one-time adjustment
Yahoo! Finance reports that federal student loans, such as Direct Loans and Federal Family Education Plan Loans (FFELP loans), are included in the one-time payment adjustment.
Borrowers of FFELP loans that are not managed by ED but by commercial lenders or Perkins loans can avail themselves of the benefits if they consolidate it into Direct loans. Borrowers must consolidate their loans with Federal Student Aid by May 1, 2023. They can apply through Direct Consolidation Loan online or with a paper form.
Read More: Student Loan Forgiveness Cancelled: To Pay Again This Summer -(2023)
