On April 19, 2022, the U.S. Department of Education announced it would use one-time account adjustments to retroactively credit millions of borrowers with additional payments toward loan forgiveness. These adjustments will help borrowers eventually qualify for loan forgiveness through income-driven repayment (IDR) plans and under the Public Service Loan Forgiveness (PSLF) program.
In recent years, loan servicers often steered student loan borrowers into forbearances. (A "forbearance" allows a borrower to stop making payments, but the debt keeps accumulating interest, increasing the loan balance.)
But servicers were supposed to advise borrowers about different options, including IDR plans. This kind of plan might have reduced borrowers' payments to as low as $0 per month and led to loan forgiveness of any remaining balance after 20 or 25 years of qualifying payments (or after 10 years for PSLF). So, borrowers that were inappropriately placed into long-term forbearances missed out on making progress toward IDR and PSLF forgiveness.
Also, forbearances were supposed to be limited to no more than 12 months at a time and no more than 36 months in total. But servicers regularly allowed borrowers to stay in forbearance for more extended periods. And servicers frequently didn't accurately record borrowers' qualifying payments on IDR plans, having no system to track payments or identify when borrowers qualified for loan forgiveness.
Here are the one-time adjustments the Department of Education will make.
According to the Department of Education, these changes will be automatically applied to borrowers' accounts later this year.
Effective date: April 19, 2022