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- Borrowers with older federal student loans, particularly FFEL loans, have an important deadline of April 30, 2024 to consolidate them into direct loans in order to have a chance at loan forgiveness due to the payment number adjustment
- The one-time adjustment of the number of payments by the Ministry of Education aims to correct previous administrative lapses by loan servicers
- This plan is part of the Biden administration's broader effort to alleviate the student loan crisis.
Borrowers with older student loans, specifically Federal Family Education Loans (FFEL) or Perkins Loans, must consolidate their student loans by April 30, 2024 to be eligible for the one-time payment number adjustment.
This initiative is set to take place this summer and will provide a lifeline to borrowers seeking either a full cancellation of their student loans or a significant loan toward such cancellation.
The Department has outlined specific steps for borrowers of certain federally administered loans, including commercially held FFEL, Parent PLUS loans, Perkins loans, and Health Education Assistance Loan (HEAL) program loans, to consolidate them.
This consolidation is critical because it makes the newly formed Direct Consolidation Loan eligible for adjustment.
One-time payment count update
The purpose of the one-time payment count update is to provide borrowers with credit for payments made since July 1, 1994, including certain periods of deferment, economic hardship and forbearance.
This adjustment is expected to significantly assist borrowers in meeting the termination criteria typically associated with Income Driven Repaid (IDR) plans.
Under IDR plans, federal student loans can be canceled after 10, 20, or 25 years of qualified payments, depending on the plan.
Additionally, for those seeking Public Service Loan Forgiveness (PSLF), the adjustment will count additional payment periods toward the program's 10-year payment requirement, provided other eligibility criteria are met.
There are currently 8 million student loan borrowers with legacy FFEL loans who may be eligible for this program. While not everyone will qualify for loan forgiveness, this has the potential to help a significant number of people get closer to the loan forgiveness they were promised when they originally enrolled in these programs.
Other benefits
Even if your loan is not forgiven under the one-time adjustment, consolidating your loan into a new Direct Consolidation Loan may also allow you to take advantage of the new Saving On A Valuable Education (SAVE) repayment plan. This program only allows you to deposit 5% of your discretionary income starting July 1, 2024.
This has the potential to save significant amounts of money for borrowers.
If borrowers default, you can also take advantage of the Fresh Start program to get back on track with your student loans by consolidating your loans. If you meet the requirements, the default setting will be removed from your credit report.
Don't miss these other stories:
Average Student Loan Debt by State in 2024. What is the SAVE Repayment Plan? Is Student Loan Debt Forgiveness Real? Debunking the myth
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