The Short Version: if you have an older FFEL loan, even a prior FFEL Consolidation Loan, make sure to consolidate this to a newer Direct Loan asap if you want all of the relief this program allows (contact us if you have any doubts or concerns about losing prior IDR time, interest rate increases, effects on PSLF etc.) While the deadline to do so is May 1, the servicers are busy and it doesn’t pay to wait until the deadline!!
For many years, student loan servicers steered struggling borrowers into forbearance instead of guiding them toward income driven repayment. Income driven payment generally caps payments at no more than 10 percent of income, and ultimately leads to loan forgiveness after 20 or 25 years of repayment. Many of these loan servicers also failed to accurately track borrowers’ progress toward forgiveness. Some of these companies had no system for tracking payments and identifying when borrowers would qualify for forgiveness.
The Department of Education created a one-time automatic waiver called the IDR Waiver to increase borrowers’ payment counts toward income-driven repayment plan forgiveness. The program allows for:
- Full and immediate forgiveness for those who have already paid for 20 years if undergrad loans; or 25 years for grad loans.
- Recount/audit for extended forbearances
- No loss of prior IDR payment history for consolidation to Direct Loans
- Deadline of May 1, 2023 to consolidate any commercially held FFEL loans to participate in the program. If you are uncertain whether your FFEL loans are commercially held or held by the Department of Education, please consider consolidating to Direct. All Direct loans will automatically qualify, provided the consolidation is done before May 1, 2023.
- Processing under the IDR Waiver began in November 2022 for loans the Department of Education already owns.
- There is no separate IDR Waiver form or application as this one time audit will occur automatically for all eligible loans (department held FFEL or Direct Loans).
- The audit will apply to Parent Plus loans.
- Payment pauses for the new Direct Loan that may not exist for the older FFEL loan.
What time will count under the IDR Waiver?
The IDR Audit will give credit for:
- Borrowers making monthly payments even if they weren’t in an IDR plan.
- Months spent on deferment (except for in-school deferment) before 2013.
- Extended forbearances that lasted over 12 consecutive months or 36 or more months cumulatively.
- This audit is a second chance for anyone who missed the October 31, 2022 deadline to consolidate to Direct Loans for those currently working public service or those who may return to public service for the 10 year forgiveness.
The pandemic pause/forbearances will count under the IDR Waiver.
Remember, federal loans must be Department held FFEL loans or Direct Loans. If unsure, please consolidate all federal loans, including Perkins loans, to the newer Direct Loans by May 1, 2023.
What happens if you miss including a loan in a consolidation?
- There is a procedure to add-on a loan within six months of the consolidation in case one or more loans were missed in the consolidation.
Can you consolidate a Direct Consolidation loan?
- You cannot, unless you have another loan to consolidate with it such as a FFEL Loan, a Perkins Loan or another Direct Consolidation Loan which has a different disbursement date.
Tips for consolidation:
- Don’t ask for the consolidation to be delayed – remember the deadline for this to occur is May 1, 2023.
- The new PSLF servicer is Mohela. However, if you are close to the deadline, you may want to choose Nelnet who is reportedly moving faster to consolidate loans (assuming this continues). The new Direct Loans would be transferred from Nelnet to Mohela once you file a PSLF application.
If this isn’t making sense, you want someone to review things and help assure you are doing the most that you can do regarding your student loan debt, please reach out to us for a consultation. We have a charge for that to offset the time it takes for one of our attorneys to speak with you about your specific loans, but it’s not much, considering the amount of debt and options that may exist to end that debt!
Contact us: https://www.christiearkovich.com/contact-us.html
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