Ministry of Education Announces Major Revisions to IDR Payment Counting

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On April 19, one day before the publication of a very critical performance audit by the US Government Accountability Office, the Department of Education (ED) announced a series of actions it’s about “answer[] historic failures in the administration of federal student loan programs. The actions target income-contingent repayment (IDR) plans, which are used by student borrowers on more than half of the more than $1 trillion in outstanding federal direct student loans. IDR plans allow borrowers to make lower monthly payments over an extended term of 20-25 years of repayment, after which borrowers become eligible for forgiveness of their remaining loan balance. Some of these changes will also impact borrowers applying for Public Service Loan Forgiveness (PSLF).

These actions, which Federal Student Aid (FSA) will begin implementing immediately, consist of the following:

  • The FSA will make a single count adjustment that will count abstentions of more than 12 consecutive months and 36 cumulative months towards remission under the IDR and PSLF.
  • The FSA will end its long-standing practice of allowing service agents to register borrowers for forbearance by text or email, and will also carry out an “external review” of service agent models and practices relating to the use of forbearance, including in partnership with the CFPB.
  • The FSA will conduct a one-time review of IDR-eligible payments for direct loans and Federal Family Education Program (FFEL) loans administered by the federal government. All months in which borrowers made payments will count towards IDR, regardless of payment plan, as well as pre-consolidation payments and deferral months prior to 2013. Any borrower who has made the required number of payments for the cancellation of the IDR according to the number of payments revision will automatically receive the cancellation of the loan.
  • The FSA will issue new guidance to service agents to ensure accurate and consistent payment counting practices, and will track payment counts in its own data systems. In 2023, the FSA will begin posting IDR payment counts on its StudentAid.gov website. ED also plans to revise IDR terms through the development of rules to further simplify payment counting by allowing multiple loan statuses to count for IDR cancellation, including certain types postponements and abstentions.

In response to ED’s announcement, the Education Finance Council, National Higher Education Resource Council, and Student Loan Servicing Alliance issued a press release in which they called the announcement of “another quick fix, a band-aid approach to complex programmatic issues within the Federal Student Loans program that have not been addressed by the FSA working with its partners to ensure borrowers’ interest remains a focus. The groups also noted that the announcement represented “another substantial change in Department of Education policy which was not shared with any prior discussion with service officers who will again be placed in the position of not being able to provide clear and concise information or answer questions from , borrowers or have planned in advance for implementation. »

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