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By Andrew Paulson, CSLP, Lead Student Loan Consultant and Co-Founder of our partner site StudentLoanAdvice.com
The Income-Driven Repayment (IDR) waiver, a one-time account adjustment, was first introduced in April 2022. This waiver came as an executive action from President Biden to help student loan borrowers who have had past troubles with IDR plans. Typically, for the president to enact changes at this scale, it would need to go through Congress. But, as has been done in the era of the student loan pause, Biden unilaterally has made significant changes to student loans.
In tandem with the IDR waiver, we are on the edge of our seats waiting for the Supreme Court's ruling on the $10,000-$20,000 Student Loan Forgiveness plan, which is expected in June.
The IDR waiver is similar to the PSLF waiver in a number of ways that we will cover, but a key difference is that it impacts a broader group of borrowers instead of those solely in public service. It is estimated that, with the IDR waiver, more than 3.6 million borrowers will receive three-plus years of credit toward loan forgiveness, and some will be eligible for immediate loan forgiveness.
A year after the initial press release, the government finally released a concrete FAQ on how this waiver will be applied to borrowers.
What Does the IDR Waiver Do?
A quick refresher: Income-Driven Repayment (IDR) Programs are payment plans that allow borrowers other options to repay their loans based on income and family size. IDR programs are highly beneficial to residents, who usually can't afford to make the standard payment on their student loans. With payments based on a percentage of discretionary income, the monthly amount due may be as low as $0 but is more likely in the $100-$400 range. IDR programs include Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE).
The IDR waiver is a one-time account adjustment that will be made to federal student loan borrowers to help them move closer to (or to receive) student loan forgiveness. You must have at least one direct federal student loan or Family Federal Education Loan (FFEL) held by the Department of Education (ED) to qualify.
Typically, a borrower interested in a federal loan forgiveness program would need to be enrolled in an IDR plan and make payments to receive credit toward a program. However, under the IDR waiver, the government will also count these periods of time as credit.
- Forbearances of 12 consecutive months or longer OR more than 36 months in total.
- Any months in repayment, regardless of the payments made, loan type, or repayment plan.
- Any month in deferment prior to 2013, excluding in-school deferment.
- Any month in economic hardship deferment on or after January 1, 2013.
- Any time in repayment prior to consolidation.
If you have a forbearance shorter than mentioned above, contact the student loan ombudsman to review your situation.
This means if you put your loans into forbearance for three years during training, you could be eligible to receive three years of payment credit to taxable (20-25 years) and PSLF forgiveness.
The IDR waiver will apply to borrowers in PSLF and taxable forgiveness. You will be eligible for loan history back to October 2007 for PSLF and July 1994 for taxable forgiveness. If, after the account adjustment, you are beyond your forgiveness milestone, you might be eligible to receive a refund for overpayments.
Please note: if you are interested in PSLF, you need to make sure you are current on your employment certification forms. The PSLF program has a tracker on MOHELA. Taxable forgiveness has yet to roll out an official tracker. You can review your payment history by looking at your student loan NSLDS file on studentaid.gov.
More information here:
10 Changes to Know About IDR Plans for Your Student Loans
How Much Are Federal Student Loans Worth?
Consolidating Loans with the IDR Waiver
In the past, consolidation was a big mistake for many if you had been out of school for years. Consolidation usually erases all previous repayment history, as it pays off the loans you include in the consolidation and issues you a brand-new loan in its place with a new interest rate and repayment plan. If you’re starting residency in the fall of 2023, you should consider consolidation and enter repayment right as you begin your intern year.
Under the IDR waiver, you can carry over payments that were made pre-consolidation. And, more importantly, the loan with the longest repayment history will be applied to all the loans included in the consolidation.
Let’s say you started borrowing in 2007 for undergrad, and you recently borrowed for graduate school in 2020. Before you borrowed for graduate school, you worked for eight years at a nonprofit and made payments in an IDR plan. If you consolidate those loans together, they will take the payment history for the loan borrowed back in 2007 and apply it to your graduate loans. This borrower would only need to make two more years of payments to reach PSLF and have all of their federal student loans forgiven. Those graduate loans will receive extra credit due to those earlier undergrad loans.
This regulation can be a game-changer for those borrowers with older student loans and a previous repayment history.
The IDR Waiver vs. the PSLF Waiver
The IDR and PSLF waivers have benefitted many borrowers on their track to loan forgiveness. The PSLF waiver lasted from October 2021-October 2022. The IDR waiver time frame is April 2022-December 2023.
There are a few similarities and differences you need to be aware of in comparing the IDR and PSLF waivers.
Similarities
- Any months in repayment—regardless of the payments made, loan type, or repayment plan—would count as forgiveness credit. The slight difference with the PSLF program is that it counted payments made back to October 2007 going forward while the IDR waiver will count payments all the way back to July 1994.
- Certain deferment and forbearances will count as months in repayment.
- When you consolidate student loans with different payment histories, the loan with the longest repayment history will be applied to all the loans.
Differences
- Under the PSLF waiver, you no longer needed to be employed full-time at a non-profit/501(c)(3) at the time of forgiveness. That means you could have a decade of previous employment at a nonprofit and be working at a private enterprise and still have your loans forgiven via PSLF. This is not the case with the IDR waiver for borrowers interested in PSLF. At the time of forgiveness, you still need to be working at a qualifying employer.
- The PSLF waiver was narrower in scope, only impacting those in public service. The IDR waiver can impact all federal borrowers.
More information here:
How to Ensure Student Loan Forgiveness Through the PSLF Program
Fresh Start Initiative and IDR waiver
If you are in default or if you were previously, you have limited options to resume good standing with your servicer. You can consolidate, rehabilitate, or pay off your student loans. Time in default does not count toward loan forgiveness, and it hurts your credit.
However, the Fresh Start initiative can also qualify for the one-time adjustment and can give you forgiveness credit for time in default back to when the loan moratorium began in March 2020. Eligible loans are:
- Defaulted direct federal student loans (prior to March 2020)
- Defaulted FFEL loans (prior to March 2020)
- Defaulted Perkins loans held by ED
IDR Waiver Q&A
How Do I Apply for the IDR Waiver?
If you would like to apply for the waiver and you have commercially held FFEL loans, consolidate your federal student loans. Those with direct federal student loans and FFEL loans held by the ED will have their accounts automatically updated. If you were required to make payments during the student loan pause, you have commercially held FFEL loans.
Who Needs to Take Action?
Many borrowers will have their loans automatically updated by the IDR waiver. However, there are some borrowers who need to take immediate action.
Borrowers with commercially held FFEL, Perkins, or Health Education Assistance Loan (HEAL) program loans need to consolidate their student loans before the end of 2023 to qualify. There could be future lawsuits that will try to block this waiver, so don't delay consolidation until the end of the year if you plan on applying.
Borrowers with direct federal student loans or FFEL loans held by the ED don’t have to consolidate their student loans to qualify. However, if you have FFEL loans held by the ED and you are planning on PSLF, you should consolidate your federal student loans.
Who Should Not Take Action?
Borrowers who have low payments to start with and who have had a significant increase in income may not need to consolidate. When you consolidate, you are required to submit a recent tax return or a paystub which can increase your monthly payments if your income has increased. Many have not certified their income since 2020. Payments would still be based on that certification unless you’ve certified after. Six months after payments resume, servicers will begin requesting you to recertify your income. So, by the middle of 2024, you should expect an increase in monthly payments. If consolidation causes your monthly payment to jump, you might be better off not consolidating to keep lower payments for longer.
In addition, if you are making more than you owe and you consolidate your student loans, you might not be able to enroll in the IBR or PAYE program. Both of these programs require a partial financial hardship to enter them. That basically means you need to enter them before you make more than you owe. If you are ineligible for PAYE or IBR post-consolidation, you can select REPAYE or ICR as an alternative. But payments in these IDR plans can be more costly. So, be sure you take this into account before you consolidate.
When Will My Student Loans Be Updated?
The account adjustment will depend on if you reach your forgiveness milestone by August 1, 2023.
If you reach forgiveness prior to that date, you should receive an update prior to August 1. If you reach forgiveness beyond that date, the update will be coming later.
When Is the Deadline to Apply for the IDR Waiver?
The IDR waiver was set to expire May 1, 2023. However, the deadline was recently pushed back until the end of 2023. I don’t recommend waiting until then to apply. If you need to take action to qualify for the IDR waiver, I would do it now. This waiver, among other student loan initiatives by the Biden administration, could come under legal scrutiny and end prior to the current deadline.
The IDR waiver could help you move closer to receiving forgiveness. At StudentLoanAdvice.com, I've personally helped a number of white coat investors navigate and succeed with the IDR waiver, resulting in forgiveness or moving closer to the end of their student loans. If you need help interpreting these changes for your personal situation, set up a time with one of our student loan experts. We will help you maximize the rules to get the best deal on your student loans.
Has the Income Driven Repayment waiver impacted your student loans? Are you planning on consolidating your loans? Does this waiver change your student loan plan at all? Comment below!
The limited PSLF waiver also counted time in forbearance. It counted if it was 12 consecutive months or greater, or 36 cumulative months or greater.
Kim,
Thanks for that. The update is reflected.
Andrew SLA
I’ve heard that income driven forgiveness is “20 or 25 years”. Can you tell us who gets 20 and who is 25? Also do years in school deferment count? I started school loans in 2003 so if it’s 20 years from them I might need to consolidate. If it’s 25 it wouldn’t be worth it since I’d lose my 1.6% rate. Thanks
Eye Doc,
It depends on when you borrowed. Because you borrowed before 2007 it would be 25 years for you to hit forgiveness. So, you might be better off just sticking with that low rate and not consolidating.
Andrew SLA
What about borrowers with only ONE commercially held FFEL consolidation loan? Per the new studentaid.gov FAQs, they cannot consolidate again into a direct consolidation loan unless one of three exceptions apply. What if none of the exceptions apply? Are the exceptions being strictly enforced? Thanks!
“If you have a forbearance shorter than mentioned above, contact the student loan ombudsman to review your situation.”
I, and many like me, we’re put on a mandatory forbearance for 6 months at the beginning of repayment. I was told this was unchangeable when I called about it at the time, and I later learned that that actually wasn’t true.
It would be great if those months counted, even though it’s less than the 12 months forbearance requirement listed. I’m not sure how to contact the ombudsman because that doesn’t seem like something that link connects to. Do I have to file a complaint first through their link and then escalate if nothing happens?
Have you had any clients attempt to get this particular issue resolved, which I imagine is fairly universal, and be successful?
JJ,
This mandatory forbearance you are referring to is grace period I believe. Grace period doesn’t count even under this one-time account adjustment. You could file a complaint with the student loan ombudsman to try and have this credited. Doubt they would count it though. I haven’t seen any clients be successful in having this period of time credited.
https://studentaid.gov/feedback-ombudsman/disputes/prepare
Andrew SLA
What about borrowers with only ONE commercially held FFEL consolidation loan? Per the new studentaid.gov FAQs, they cannot consolidate again into a direct consolidation loan unless one of three exceptions apply. What if none of the exceptions apply? Are the exceptions being strictly enforced? Thanks!
CJ,
Just to reiterate what question I believe you are referring to?
If you only have one FFEL consolidation loan and that’s the only federal student loan you have, then you are probably out of luck with the IDR waiver as long as you don’t fit one of the three exceptions. 1.) You’re in default or your loan is delinquent and has been referred for default aversion, and you agree to repay your new Direct Consolidation Loan under an IDR plan, 2.)you’re consolidating in order to qualify for the PSLF Program or 3.)you’re consolidating to use the “no accrual of interest benefit” for active-duty service members.
Could call and ask your servicer just to double check if you can qualify.
Andrew SLA
Thanks for the reply. Yes, you have the correct FAQ. Regarding exception number 2, how does the Dept of Ed determine or enforce if someone wants to “qualify for the PSLF program”? I have not been and am not currently in public service, but I do have an interest and I might be in public service someday. Perhaps that is good enough to satisfy exception number 2 for those with a single commercial FFEL consolidation loan wishing to consolidate into a direct consolidation loan? Thanks!
CJ,
I’m not exactly sure how they vet this, but I can think of two ways they could. 1.) If you have completed a PSLF form in the past. 2.) On the consolidation application it will ask if you are working at a non-profit/501(c)(3).
Andrew SLA
Agreed, assuming the exception requires a history to date of public service. I am not sure how or where to find out if future public service is good enough for this exception. The consolidation regulation is found here https://www.law.cornell.edu/cfr/text/34/685.220. I am looking for official interpretation of the statute, from the Dept of Ed or otherwise.
Under the special waiver, I was able to successfully consolidate my undergrad loans with my first year grad school loans. My payments were also updated. Unfortunately, the consolidated loan doesn’t include all my grad loans (like those from my second year). Under the IDR adjustment, can I consolidate all my loans at the end of 2023 and my payments will count toward it?
Erika,
Yes. They will credit you the loan with the longest payment history when you consolidate loans with different payment histories together. I wouldn’t wait until the end of the year though.
Andrew SLA
I was in forbearance throughout my four year residency (2.5 years normal forbearance and Covid forbearance thereafter). My loans have been part of the federal pause since I graduated. My residency program was eligible for PSLF, as is my current employer (I did work one year for a non-PSLF organization after residency). I never applied for PSLF since forbearance traditionally didn’t count.
With the adjustments you described above would I be able to apply for PSLF and get back-credit for the following payments when I was in forbearance: 4 years residency + 1 year post residency w PSLF eligible employer? These loans are not consolidated. Would they need to be?
Hi FB,
As long as the 2.5 yr general forbearance was continuous, then you should have about 5 years of credit. If you have all direct federal student loans, then you shouldn’t need to consolidate your loans. If you have FFEL loans, then I’d suggest consolidation.
Andrew SLA
It’s not clear to me from the post, but in order for old payments to count to PSLF.. you would still need to have been employed by a 501c3 at the time, correct? I have undergrad loans from 2011 that I was paying off, and was not working for a 501c3 at that time. Then 4 years forbearance in medical school, then making payments for PSLF during residency until now. Would any of those past payments (During medical school and prior) count towards forgiveness for me? Currently I am in REPAYE.
WT,
Yes. Any previous time you were working full-time at qualifying employer would count if you were in repayment or fit the deferment or forbearance perimeters I explained in the post.
None of the time during medical or before will count to PSLF. Med school won’t count because it is in-school deferment and your time prior to med school won’t because you were not working at a qualifying employer.
Andrew SLA
I consolidated my federal loans from medical school and received 84 months of credit towards PSLF. My loans were in forbearance all of that time and I never applied for an IBR plan. When repayments re-start do I need to apply for an IBR plan to have payments count towards the remaining 36 months for PSLF forgiveness? The guidance at studentaid.gov implies this but is based pre-waiver. If I do need to be on an IBR plan is there any way to get to a 10yr standard plan?
Hi AL,
When you consolidated your student loans you should have selected a repayment program. If you didn’t, you need to be in an IDR plan when payments start. You are not eligible for the standard 10 year repayment plan post consolidation unless you consolidated less than 7.5k in student loans (highly doubt this is the case). Your repayment options for the remaining 3 years to obtain PSLF are PAYE, REPAYE, IBR or ICR. You should pick the cheapest option to maximize PSLF.
Andrew SLA
I’ve been on the REPAYE plan since residency. For the last 2-3 years I’ve been working part time 24 hours weekly at a PSLF eligible employer. Would the IDR or PSLF waivers apply for those payments that I’ve been making?
KC,
Currently no. You need to be working full-time or a minimum of 30 hours per week at multiple qualifying institutions for your employment to qualify. Beginning July 1, 2023, they are simplifying the requirements for PSLF to a flat 30 hours p/week. So, if you could get your hours up to 30 hours p/week, your employment would begin to qualify.
Andrew SLA
Can you comment on PSLF in California and Texas? Hospitals cannot employ physicians in these states but there was some talk of a waiver or a work around for this.
KR,
Yep. Wrote a whole post about it.
https://www.whitecoatinvestor.com/pslf-loophole-california-texas/
Andrew SLA
Does any of this apply to someone who consolidated their loans with a private bank (Laurel Road) at the beginning of residency?
No. Only federal loans.
I figured. Is there any option for us? Kicking myself for doing that refinance.
Not that I’ve ever heard of. It’s obviously very important that you are 100% sure you are not going for forgiveness before refinancing federal loans to private loans.
I have been working for a government hospital for the past 7 years and last year I successfully applied for PSLF under the temporary waiver (I consolidated my loans during this process), so I am 7/10 of the way there. However I did not realize that my time in forbearance in residency (at a state university) would count for this, so I did not certify my residency employment at that time (I only certified my current employer). Regarding that residency period, my account says “This payment period is eligible but requires approved employment in order to qualify.”
If I now certify that employment will they still count it?
I don’t think there is any time limit on certification so I’d go back and get it!
Hi,
Thanks so much for writing this article. Appreciate the clarity this brings.
I was wondering if you have any experience with the following scenario, related to the criteria for 12 consecutive months or 36 months total.
I am now out of training and in practice, but loans have been in COVID freeze since that time. I have a relatively high loan amount around $275,000. Not counting the COVID pause (those show up as qualified payments for me on the PSLF tracker), I have around 37 months in forbearance from training. About 22 of them are consecutive- I think the IDR waiver will turn those 22 months into qualified payments. The remaining 15 are over two non-consecutive time periods, neither of which is consecutive with the first 22 months.
Any educated guess on whether I’ll get 22 or 37 months of credit toward PSLF with the IDR waiver?
Thanks!
Hi BC,
If the 37 months of forbearance is prior to the covid pause all of those months would count. You need to have a minimum of 36 months cumulative before they will consider it for the IDR waiver. Any covid forbearance would count as well. Make sure you are up to date on your PSLF forms before the year is over.
Andrew SLA
Thanks!