IDR Waiver: Income-Driven Repayment Plan Updates And Forgiveness

The U.S. Department of Education has implemented several waivers for income-driven repayment plans. Colloquially, these have become known as the "IDR Waiver", although there is no specific program actually named this directly.

These waivers have updated or fixed several issues impacting borrowers on income-driven repayment plans, such as Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), Pay as you Earn (PAYE), and Revised Pay as you Earn (REPAYE).

Here are the changes and fixes that borrowers on an IDR plan need to know about.

Editor's Note: This article has been updated to reflect the changing dates of the payment pause, as well as new information regarding the timing of the IDR Waiver.

The CARES Act And Extensions

The Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136), also known as the CARES Act, was passed by Congress on March 27, 2020.

Section 3513 of the CARES Act provides a payment pause and interest waiver on eligible federal student loans. The obligation for borrowers to make payments on eligible federal student loans is suspended, and no new interest will accrue.

Nevertheless, the paused payments still count as though they had been made toward the various student loan forgiveness programs. These loan forgiveness programs include Teacher Loan Forgiveness and Public Service Loan Forgiveness, as well as the forgiveness of the remaining debt after 20 or 25 years of payments in an income-driven repayment plan. Borrowers must still work in qualifying jobs for Teacher Loan Forgiveness and Public Service Loan Forgiveness.

This student loan moratorium has been extended a total of eight times, with the most recent extension set to expire on August 30, 2023. This yields a total of 42 qualifying payments toward student loan forgiveness, which is half of the required number of payments for Teacher Loan Forgiveness, one-third of the required number of payments for Public Service Loan Forgiveness and 10% or 12.5% of the required number of payments for income-driven repayment. 

Limited PSLF Waiver

The U.S. Department of Education announced a Limited PSLF Waiver. 

Previously, borrowers had to make 120 qualifying payments while working full-time in a qualifying public service job to have their remaining eligible federal student loan debt qualify for forgiveness under Public Service Loan Forgiveness (PSLF). Qualifying payments included payments made under standard 10-year repayment or an income-driven repayment plan. Only loans in the Direct Loan program were eligible.

Congress also created the Temporary Expanded Public Service Loan Forgiveness (TEPSLF) to allow payments made under graduated repayment and extended repayment plans to count, provided that the payments made during the last 12 months were at least as much as they would have been under an income-driven repayment plan.

The Limited PSLF Waiver expands which payments will count toward forgiveness, provided that the borrower worked in a qualifying public service job and files a PSLF form using the PSLF Help Tool by October 31, 2022. The following types of payments count toward PSLF:

• Late payments and partial payments
• Payments made under any repayment plan
  
• Payments made on an Federal Family Education Loan Program (FFELP) loan, if the borrower consolidates the FFELP loans into a Federal Direct Consolidation Loan and then files a PSLF form by the deadline
  
• Payments made prior to consolidation
  
• Qualifying payments for Teacher Loan Forgiveness
  

Parent PLUS loans are not eligible for the Limited PSLF Waiver.

American Rescue Plan Act

The American Rescue Plan Act (P.L. 117-2), which was enacted on March 11, 2021, provides tax-free student loan forgiveness and discharge for all student loans through December 31, 2025.

This includes the forgiveness of the remaining loan balance after 20 or 25 years of payments in an income-driven repayment plan.

Loan forgiveness under Public Service Loan Forgiveness was already tax-free.

Fix For Payment Count Failures And Forbearance Steering

The U.S. Department of Education announced a set of fixes for various problems in the federal student loan programs on April 19, 2022.

Forbearance steering. The U.S. Department of Education alleges that student loan servicers improperly placed borrowers in forbearances instead of income-driven repayment plans. A forbearance does not count toward loan forgiveness, while income-driven repayment does. To address this problem, the U.S. Department of Education will count “long-term forbearances” toward forgiveness under PSLF and income-driven repayment. Long-term forbearances include forbearance periods of 12 consecutive months or longer and forbearances of 36 cumulative months or longer. If a borrower does not qualify for this waiver, but feels that they were a victim of forbearance steering, they can request a review of their situation by filing a complaint with the FSA Ombudsman. The adjustments of the qualifying payment counts will occur in fall 2022. 

Problems with qualifying payment counts. Loan servicers were not tracking the number of qualifying payments toward the automatic forgiveness of the remaining debt after 20 or 25 years of payments in an income-driven repayment plan. To address this problem, the U.S. Department of Education will count any month during which the borrower made a payment on their loans, regardless of repayment plan, and including payments made prior to consolidation. 

Failure to count economic hardship deferment. Months in an economic hardship deferment count toward forgiveness of the remaining debt after 20 or 25 years of payments in an income-driven repayment plan. But, loan servicers were not counting qualifying payments. Because it is not possible to distinguish an economic hardship deferment from other types of deferments prior to 2013, months spent in any deferment (other than an in-school deferment) prior to 2013 will count toward the income-driven repayment forgiveness.

Who Gets Loan Forgiveness Under The IDR Payment Count Waiver

As part of the Department of Education's fix for failing to count qualifying payments under various repayment plans, ED is doing a count adjustment and offering loan forgiveness to those that qualify.

According to the Department of Education, the account adjustment will count time toward IDR forgiveness, including:

• any months in a repayment status, regardless of the payments made, loan type, or repayment plan;
• 12 or more months of consecutive forbearance or 36 or more months of cumulative forbearance;
• any months spent in economic hardship or military deferments in 2013 or later;
• any months spent in any deferment (with the exception of in-school deferment) prior to 2013; and
• any time in repayment (or deferment or forbearance, if applicable) on earlier loans before consolidation of those loans into a consolidation loan.

Generally, repayment status includes any periods where the borrower was enrolled in a repayment plan. Repayment status does not include periods in forbearance, deferment, bankruptcy, or default. However, certain periods of forbearance, deferment, or default will count toward forgiveness in the circumstances described above.

Any borrowers with loans that have accumulated eligible time in repayment of at least 20 or 25 years will see automatic forgiveness, even if they are not currently on an IDR plan.

Loans are eligible for forgiveness under the IDR waiver based on the following timeframes:

Note: The double-consolidation loophole for Parent PLUS Loans is also ending as part of this waiver.

IDR Waiver Deadline

In order to qualify for the IDR Waiver, borrowers must have loans held by the Department of Education. If you have old FFEL loans, you must consolidate your loans into Direct consolidation loans before June 30, 2024 in order to qualify for the adjustment recount. Note: This was recently extended.

ED plans to have all payment counts updated by mid-2024.