What is Income-Based Repayment Account Correction and How to Apply?
This Biden administration’s plan to forgive federal student debt of up to $20,000 per borrower It didn’t go very well, to say the least. Legal struggles continue to delay the process. loan forgiveness implementation of the program was abandoned and it is no longer certain that it will see the light of day.
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This uncertainty has left many cash-strapped borrowers scrambling for other options. For some, one of the options is to seek student loan forgiveness under income-based repayment (IDR) arrangement schemes. According to Studentaid.gov, these are one-time adjustments to accounts payable to correct past mistakes. The ultimate goal is to permanently fix the way IDR payments are counted by reforming the US Department of Education’s IDR monitoring procedures.
As part of the initiative, the Department of Education will make one-time adjustments to IDR-eligible payments for all William D. Ford Federal Direct Loan (Direct Loan) Program and federally owned Federal Family Education Loan (FFEL) Program loans. Adjustments will count time towards IDR amnesty, including:
Any month in repayment status, regardless of payments made, type of loan or repayment schedule.
Full 12 months or more consecutive indulgences or 36 months or more cumulative indulgences.
Months spent in post-2013 economic distress or military service postponements.
Months spent in any deferral (excluding in-school deferral) before 2013.
Any time in the repayment of previous loans before these loans are consolidated into a consolidation loan.
The Education Department announced the arrangement in April 2022. At the time, the agency said several thousand borrowers with older loans will receive amnesty through IDR, and more than 3.6 million borrowers will receive at least three years of additional loans for IDR forgiveness.
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As Forbes reports, the IDR Account Adjustment essentially allows the Education Department to retroactively issue loans to borrowers for a 20 or 25-year repayment period under IDR plans. This is the case even if borrowers are repaying their loans under a different plan. Repayment plans are based on a formula based on income and family size. After 20 or 25 years of repayment, borrowers can get full student loan forgiveness.
Payback periods will also be included in the 120 eligible payments required for Public Service Loan Forgiveness (PSLF) – at least for borrowers who qualify to work for PSLF at the time.
Education Secretary Miguel Cardona said in a tweet in November that the goal is to “improve Income-Based Repayment, Public Service Loan Forgiveness, and other student loan programs to help borrowers get the relief they’ve earned.”
Adjustments under the initiative will be automatically applied to borrowers who already have federally managed loans. However, some borrowers may have to consolidate their loans through the federal Direct consolidation program to qualify.
Borrowers who commercially administer the FFEL, Perkins, Health Education Assistance Loan (HEAL) Program or other Indirect Loans must apply for a direct consolidation loan by May 1, 2023 to take full advantage of the one-time account arrangement. According to Studentaid.gov.
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To learn more about the IDR Adjustment and how to apply it, visit Studentaid.gov. Income-Oriented Repayment (IDR) Plan Request page.
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This article was originally published GOBankingRates.com: Student Loan Amnesty: What is Income-Based Repayment Account Arrangement and How Can You Apply?
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