Personal Finance

Student Loan Forgiveness: These Deferment And Forbearance Periods May Count

Navigating federal student loan forgiveness programs has historically been difficult for borrowers. Deferments and forbearances — periods of nonpayment for designated reasons, such as financial hardship — have often been a major impediment, particularly for loan forgiveness programs that require borrowers to be in a “repayment” status to make progress.

But under several initiatives by the Biden administration, deferment and forbearance periods may actually count towards student loan forgiveness. This may significantly accelerate some borrowers’ progress towards loan forgiveness, while allowing others to get their loans fully discharged.

Here’s an overview.

Student Loan Pause Can Count Towards Student Loan Forgiveness

Under the ongoing Covid-related forbearance, which has paused student loan payments since March 2020, the months of suspended payments can count towards student loan forgiveness under Income-Driven Repayment (IDR) and Public Service Loan Forgiveness (PSLF) as if payments were being made.

“Your paused payments will count toward IDR forgiveness if you’re on an IDR plan,” says Education Department guidance. “If you enroll in an IDR plan during the payment pause, your payments will remain paused and will count toward IDR forgiveness. Your monthly payments will restart at the new amount after the payment pause ends.”

Similarly, “Paused payments count toward PSLF… as long as you meet all other qualifications,” says the Education Department. “You will get credit as though you made monthly payments.” Borrowers need to complete and submit PSLF employment certification forms to receive PSLF credit.

Following President Biden’s most recent extension of the student loan pause to June 2023, borrowers may ultimately receive more than three years of “free” credit towards IDR and PSLF student loan forgiveness through the Covid forbearance.

Student Loan Forgiveness Credit Under PSLF Waiver and IDR Account Adjustment

Two temporary Biden administration initiatives also allow certain past periods of deferment and forbearance to count towards student loan forgiveness — the Limited PSLF Waiver, which ended last October, and the IDR Account Adjustment, which is ongoing.

Under these initiatives, the Education Department can count the following towards a borrower’s student loan forgiveness term under PSLF and IDR:

  • 12 or more months of consecutive forbearance;
  • 36 or more months of cumulative forbearance over a loan’s repayment term;
  • Any months spent in economic hardship or military deferment after 2013;
  • Any months spent in any deferment (with the exception of in-school deferment) prior to 2013.

The PSLF Waiver ended on October 31, but the IDR Account Adjustment is just getting started and extends many of the benefits of the PSLF Waiver. Importantly, “Borrowers who have commercially managed FFEL, Perkins, or Health Education Assistance Loan (HEAL) Program loans should apply for a Direct Consolidation Loan by May 1, 2023, to get the full benefits of the one-time account adjustment,” according to the Education Department.

Note that the Covid-related student loan pause does not count towards a borrower’s 12 consecutive months or 36 cumulative months of forbearance under these initiatives (but, as noted above, the Covid forbearance itself can count towards loan forgiveness).

Some Deferment and Forbearance Periods May Count Towards Student Loan Forgiveness Under New Regulations

While the sweeping deferment and forbearance credit will benefit millions of borrowers, the PSLF Waiver and IDR Account Adjustment are one-time, temporary initiatives.

However, the Biden administration has also released proposed regulations that will make more lasting changes to federal student loan forgiveness programs. While not quite as generous as the one-time initiatives, these reforms would allow certain deferments and forbearances to count towards IDR and PSLF student loan forgiveness once the temporary programs end. This includes the following:

  • Cancer treatment deferment;
  • Military service deferment;
  • Post-active-duty student deferment;
  • Economic hardship deferment, which includes service in the PeaceCorps;
  • AmeriCorps and NationalGuard service forbearances;
  • U.S. Department of Defense Student Loan Repayment Program forbearance;
  • Administrative or mandatory administrative forbearances.

In addition, under an overhaul of Income-Driven Repayment the Biden administration announced earlier this month, “Borrowers in other types of deferments and forbearances would have some opportunity to make catch-up payments to help them get back on track toward loan forgiveness.” This will provide borrowers with “a path to receive credit for other periods in deferment or forbearance that are not being credited automatically,” according to an Education Department fact sheet.

Most of the new regulations are set to go into effect for PSLF on July 1, 2023. The implementation timeline for the new IDR regulations is less clear, however.

Further Student Loan Forgiveness Reading

Here’s What You’ll Pay, And When You’ll Get Student Loan Forgiveness, Under Biden’s New Plan

Your Student Loan Forgiveness Is Getting Delayed, And It May Get Worse

Big Student Loan Forgiveness Update As Education Department Clarifies Eligibility For One-Time Adjustment

Biden To Supreme Court: My Student Loan Forgiveness Plan Is Legal

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