What Income Driven Repayment Account Adjustment Means for Borrowers.

After the Supreme Court knocked down President Biden’s student loan debt relief plan as unconstitutional, his administration released fixes to Income-Driven Repayment Plans that are expected to provide debt relief to more than 800,000 borrowers.

“For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness,” said U.S. Secretary of Education Miguel Cardona. “Today, the Biden-Harris Administration is taking another historic step to right these wrongs and announcing $39 billion in debt relief for another 804,000 borrowers.“

Eligibility for forgiveness pertains to how many years a borrower has been making monthly loan payments. If a borrower has been making payments for more than 240 or 300 months, then they are eligible. This timeframe is equivalent to 20 to 25 years of repayments. Eligibility is also based on the type of plan the borrower is repaying towards — which can be an IDR (Income-Driven Repayment) plan or a standard repayment plan.

The number of required payments will vary depending on when the borrower first took out the student loan, the type of loan(s) they borrowed, and the IDR plan they are enrolled in. More specific borrowers receiving this forgiveness would be ones with Direct Loans or Federal Family Education Loans — including Parent PLUS loans of either type. This pertains to people who have reached the necessary forgiveness threshold as a result of receiving credit toward IDR forgiveness.

An IDR plan is designed to help people who have their federal student loan debt represent a significant portion of their annual income. This plan allows the borrower to restructure their monthly payments based on their income and family size. The Department of Education will continue to notify eligible borrowers about forgiveness options every two months until next year. 

Next year, all borrowers not eligible yet will have their payment count updated. If you are eligible for Biden’s recent disbursement, you will be notified immediately via email. Discharges will begin 30 days after you receive the email with no further actions needed to be taken by you.

If you wish to opt out of the forgiveness for any reason, you must reach out to your loan servicer during the 30 days before the discharge is made. You will be notified by your loan servicer once the forgiveness has been discharged. You will also have your monthly payments paused until you receive the discharge.

If you have opted out of the forgiveness, then your monthly repayments will still be in effect like normal. Outstanding student loans will start accumulating interest on September 1, 2023, and repayments will resume in October 2023.