Administrative Forbearance for Student Loans

Editor's note: While administrative forbearance does count towards Income Driven Repayment and PSLF according to these updated IDR regulations, an appeals court put this rule on hold pending final litigation being settled. Hence, any administrative forbearance at the moment will not count towards forgiveness counts. It could retroactively count if the courts unblock the Biden administration regulations.

Federal student loan borrowers have access to a new income-driven repayment plan, the SAVE plan. Unfortunately, servicers have had enormous problems calculating what payments should be under that plan.

Instead of billing borrowers an incorrect amount, servicers have tended to use an administrative forbearance instead. This gives the servicer time to get a borrower’s payment calculated correctly.

Administrative forbearance also counts for PSLF and IDR forgiveness under new regulations finalized in July 2023 (see § 685.205(b)(8)). 

A recent press release clarified that in addition to counting these months of forbearance towards forgiveness programs, servicers will adjust any accrued interest back to zero.

The Biden administration has chosen to use administrative forbearance as a go to for fixing any number of student loan servicer and repayment problems.

That makes sense as this loan status counts for forgiveness programs AND has the added benefit of you not needing to pay anything.

Let’s take a look at what we know about administrative forbearance and what it means for you.

Servicers unable to calculate payments

Continued confusion about student loan repayment and student loan forgiveness is due, in part, to changes to what was proposed by President Joe Biden. The Supreme Court struck down his plan to forgive up to $20,000 in student loan debt for millions of borrowers.

On top of that, many borrowers have new loan servicers. Not much support has been provided from servicers in terms of explaining the resumption of student loan interest accrual in September 2023 or the requirement to begin making payments in October.

The Consumer Financial Protection Bureau (CFPB) reports that, in the past, student loan servicers have made it difficult for borrowers to get into the income-driven plans that would help them, as well as getting information about cancellation and loan forgiveness programs. The CFPB says that it has found past incidents of errors, delays, red tape and illegal actions that are detrimental to borrowers.

During the summer, Democratic lawmakers sent different letters to servicers, demanding to know what measures were being taken to protect borrowers, expressing concern that none of the old issues had been resolved and that there was the potential for a whole host of new issues.

Student loan servicers have pointed the finger at Congress, insisting that lawmakers haven’t provided them with adequate resources to prepare for the end of measures put in place during the coronavirus pandemic, nor to prepare them for a new repayment plan and to handle all of the waivers.

Servicers do not have enough money to properly do their job, due to lack of Congressional appropriation. Hence, the servicers are buying themselves more time to calculate payments by putting borrowers into administrative forbearance.

MOHELA administrative forbearance

MOHELA was the first servicer to use mass administrative forbearance while they try to deal with a backlog of paperwork and attempt to figure out new payment amounts under income-driven repayment (IDR), including the new SAVE plan.

Because new rules from the Education Department now say that mandatory administrative forbearance counts toward Public Service Loan Forgiveness (PSLF), MOHELA can use this forbearance path to give itself more time to make calculations without hurting borrowers.

MOHELA will often put borrowers into administrative forbearance without asking a borrower. If this happens to you, do not worry due to the crediting of PSLF, IDR, and zero interest accrual.

What's Happening with the MOHELA Administrative Forbearance During the Transfer to Federal Student Aid?

During summer 2024, PSLF will be managed directly by Federal Student Aid. Additionally, all borrowers with MOHELA are moving to a student aid branded portal.

Since bills have to be generated 30 days before they're sent out, MOHELA likely did not get the payment information they needed from Department of Ed with the change in the SAVE plan payment formula as of July 1.

So the easiest path was to put borrowers into administrative forbearance, which again counts for PSLF and IDR forgiveness.

Nelnet administrative forbearance

As of October 2023, Nelnet also appeared to adopt an aggressive stance towards placing borrowers into administrative forbearance.

Nelnet had in some cases encouraged borrowers to make payments under a standard plan until their paperwork is processed.

In this case, it results in borrowers being stuck making higher monthly payments toward their student loans than they would normally need to under an IDR plan. This can impact their personal finance situation as the standard plan might come with much higher payments than they can afford with their current income.

This might be why Nelnet changed course and started opting more borrowers into the administrative forbearance status.

Aidvantage administrative forbearance

Aidvantage appears to have no trend at the present time like Nelnet and MOHELA, which are using administrative forbearance in a broad way.

That said, do not be surprised if you get placed into this status as an Aidvantage borrower.

What to do while you're stuck in administrative forbearance

Because of the generous stance the Department of Education is taking on this administrative forbearance status, borrowers stuck in this position should not worry.

However, borrowers do need to figure out what to do after this forbearance is over, which we expect will be brief for most borrowers (only a couple to a few months).

If you need help figuring out what to do, check out our custom student loan planning service.