Biden To Lower Student Loan Payments, Extend Deadline For Some Borrowers On IDR

In a surprise announcement last week, the Biden administration said that it would be reducing payments and pushing out a key deadline for some federal student loan borrowers who are repaying their loans under income-driven repayment plans.

The announcement followed some concerns raised earlier by advocates that some student loan borrowers were being pushed into higher monthly payments sooner than they should have been. The Education Department will be providing the relief automatically.

Here’s what you need to know.

Student Loan Forgiveness And Lower Payments Under IDR

IDR programs, which allow borrowers to repay their federal student loans based on their income, can provide affordable monthly payments and eventual student loan forgiveness. The plans exempt a certain initial amount of income, and then use a formula to calculate a borrower’s monthly payment based on their income and family size. Those who don’t wind up paying off their student loans in full can be eligible for loan forgiveness after a certain number of years in repayment — typically 20 or 25 years, depending on the plan.

The Biden administration has been touting the SAVE plan, a new IDR option that provides for even lower payments than most other IDR plans. SAVE can shorten the student loan forgiveness timeline to as little as 10 years for those who borrowed relatively small amounts. At least seven million borrowers have enrolled in SAVE, according to Education Department data.

Typically, borrowers must recertify their income annually to remain in an IDR plan. And changes to income may result in adjustments to a borrower’s monthly payments. Following the end of the Covid-19-related forbearance period last fall, the Education Department indicated that no one would be required to recertify their income for their IDR plan until March 1, six months after payments resumed. This allowed many borrowers to be able to continue making IDR payments based on lower income they had been earning prior to the pandemic.

But because loan servicers need time to recalculate a borrower’s IDR payments, some borrowers with IDR anniversary dates scheduled for after March 1 started receiving notices that they had to recertify their income in January or February. This seemed to contradict the department’s published guidance that no one would need to recertify their income prior to March 1, leading to some confusion and frustration.

Biden Administration Announces Lower IDR Payments And Extended Recertification Deadline

Last week, the Education Department announced that it would be pushing out the earliest required 2024 IDR recertification deadline from March 1 to sometime in September.

“Deadlines for updating your income and family size information for your IDR plan have been extended to late September 2024, at the earliest,” says the announcement. “We’ve extended this pause as part of our continued support for borrowers as they return to repaying student loans.”

The department explained how the deadline extension will impact borrowers, depending on whether or not they already recertified their income or experienced an increase in their monthly payments:

• For borrowers who have not recertified yet: “We’re going to give you a payment pause for the month of March so that we can make sure you’re able to keep your correct IDR monthly payment amount,” says the department. This will likely appear as an administrative forbearance.
• For those who experienced an increase in their monthly payments as a result of early IDR recertification: “We will return you to your previous monthly payment amount,” effectively lowering their payments.
• If a borrower’s monthly payment increased as a result of early IDR recertification, “We won’t make any changes to your monthly payment amount,” the department’s’ announcement says.

The department indicates it will contact borrowers three months before their revised IDR recertification deadline to start the process of updating income information.

Other Student Loan Forgiveness Updates For IDR Plans

In addition to revising IDR recertification deadlines, the Biden administration also announced early implementation of shorter student loan forgiveness timelines for certain borrowers under the SAVE Plan. At least 150,000 borrowers received student loan forgiveness as a result.

The administration is also implementing the IDR Account Adjustment, a temporary initiative that can allow borrowers to be credited for time toward their IDR student loan forgiveness term, including for periods of repayment under non-IDR plans and certain months spent in deferment or forbearance. Hundreds of thousands of borrowers have already gotten their student loans forgiven through the initiative. The department plans on publishing IDR payment counts for borrowers by July, allowing people to see how much time they have left on their loan forgiveness term.

The Education Department has also been rolling out a new IDR automatic income recertification benefit. When borrowers enroll in (or recertify their income for) IDR plans, they will be able to opt into a data-sharing tool that allows the IRS to provide a borrower’s income information to the department. The department can then automatically update a borrower’s IDR payments annually, without a manual application process. Borrowers can opt in using the online IDR application available at StudentAid.gov.