The U.S. Department of Education is offering respite to over 3.6 million borrowers under the William D. Ford Federal Direct Loan Program by extending the deadline for income-driven and public student loan forgiveness applications to April of next year, moving away from the original December 31 cutoff.
The decision, part of an ongoing initiative to rectify historical oversights in loan management, is set to provide at least three years of additional credit toward loan forgiveness. It aligns with the Biden administration’s broader efforts to alleviate the financial pressures faced by students and graduates, particularly those affected by past bureaucratic challenges, the U.S. Department of Education said.
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According to a blog post issued by Richard Cordray, the Federal Student Aid’s Chief Operating Officer, “Since this summer, the U.S. Department of Education (Department) has approved almost $44 billion in debt relief for more than 900,000 borrowers as part of the payment count adjustment,” the executive continued, “and we’re not done.”
The Department of Education’s latest update aims to reflect borrowers’ payment histories more accurately. The adjustment process, expected to be completed by July 1, 2024, opens a window until April 30, 2024, for borrowers to submit loan consolidation applications, which the Department of Education said is crucial for maximizing the benefits from recalculated payment counts.
“We will continue identifying borrowers eligible for forgiveness regularly so they don’t have to wait to get relief. Any extra payments will be refunded. For everyone else, we expect to complete the full adjustment by July 1,” the chief operating officer said.
Newsweek has reached out to the U.S. Department of Education via email for comment.
Who Benefits
The adjustment predominantly targets borrowers currently or previously enrolled in Income-Driven Repayment (IDR) plans and those participating in the Public Service Loan Forgiveness (PSLF) program. It includes Direct Loans and FFEL Program loans managed by the Department of Education at the time of implementation, as well as Direct Consolidation Loans that have repaid privately held Perkins or FFEL Program loans.
Under the updated guidelines, any months spent in a repayment status, irrespective of the payment amount or plan type, will now count towards loan forgiveness. It also encompasses periods of forbearance or deferment, which were previously excluded from forgiveness calculations. For borrowers who have accumulated the required 20 or 25 years in eligible repayment, automatic forgiveness will be granted, even if they are not actively on an IDR plan.
According to data from the third quarter of this year, Americans collectively owe roughly $1.73 trillion in federal and private student loan debt, with the average federal student loan borrower indebted to the tune of about $37,600.
The Department of Education’s extension for IDR and PSLF program participants symbolizes the Biden administration’s continued commitment to student loan reform, Cordray said.
“From Day One, the Biden-Harris Administration has prioritized supporting student borrowers and fixing the broken student loan system,” the chief operating officer said in the post. “The payment count adjustment is a critical piece of this effort.”
The change is anticipated to bring financial relief and stability to a significant portion of the student borrower population, especially those dedicated to public service and those on income-driven repayment plans.
“We will continue working to provide student loan borrowers with the relief they have earned and affordable pathways out of debt,” he said.
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