These 3 Biden Student Loan Relief Programs End in September

Three major Biden administration student loan relief programs are on track to end during the month of September. The benefits of these programs have had far-reaching effects, and their conclusion will impact student loan forgiveness, repayment, collections, and credit reporting for millions.

Here’s a breakdown and what borrowers should know.  

IDR account adjustment forgiveness program ending September 1 — Maybe

The IDR account adjustment, a temporary initiative that began last year, has been one of the Biden administration’s most successful student loan relief programs. 

Designed to remedy longstanding problems with income-driven repayment plans, the initiative retroactively credits qualifying borrowers with time that can count toward IDR loan forgiveness on 20-year and 25-year terms. The periods can potentially also count toward Public Service Loan Forgiveness (PSLF) for qualifying borrowers.

How does the adjustment affect loan forgiveness?

“If you’re on an IDR plan or working toward PSLF, your remaining loan balance gets forgiven after you make the required number of payments,” explains Education Department guidance. 

But because of numerous issues with these programs that went on for years, including poor record-keeping and inadequate oversight, many borrowers were steered into costly forbearances or didn’t receive the IDR or PSLF credit that they should have if the programs had been functioning properly.

“With this payment count adjustment, we will change whether certain payments or months are credited toward your loan forgiveness,” says the department. Under the adjustment, the following past periods can count toward student loan forgiveness under IDR and PSLF:

• Past repayment periods under non-IDR plans (even those before consolidation)
• Certain prior deferment periods
• Certain prior forbearance periods

Borrowers who get enough IDR or PSLF credit to reach the 20-year or 25-year mark (depending on whether or not they have student loans from graduate school) would qualify for complete student loan forgiveness — and more than one million borrowers have already received discharges under the program, according to the Biden administration. 

Many other borrowers will shorten their remaining time in repayment as a result of the initiative. “More than 3.6 million William D. Ford Federal Direct Loan (Direct Loan) Program borrowers will receive at least three years of credit toward loan forgiveness,” says the department.

Challenges and legal uncertainties

The Biden administration indicates that it will complete implementation of the IDR account adjustment by September 1. However, it is unclear if recent legal challenges seeking to block the SAVE plan — one of several IDR options — may impact this timeline or delay relief.

“The information presented on this page related to income-driven repayment plans, including the SAVE Plan, may not be accurate at this time,” says a cryptic Education Department message on the web guidance associated with the IDR account adjustment. 

The message follows an injunction issued by the 8^th Circuit Court of Appeals that blocks student loan forgiveness for borrowers enrolled in SAVE. The Biden administration is appealing that ruling to the U.S. Supreme Court.

Student loan repayment on-ramp ends September 30

Another temporary Biden administration program, this one intended to ease the transition back to repayment after the Covid-19 forbearance, will conclude at the end of September.

For more than three years, most federal student loan payments were paused, and interest accrual was frozen under the Covid-19 emergency forbearance. Because many Americans’ financial circumstances changed during that time, and some borrowers may have made financial decisions based, in part, on having no student loan payments, the Biden administration decided to establish temporary flexibilities associated with the return to repayment.

Understanding the on-ramp benefits and limitations

Under the Biden administration’s so-called “on-ramp” period, borrowers who missed payments on their federal student loans would not be subject to adverse consequences such as:

• Late fees
• Negative credit reporting
• Default
• Collections actions

Instead, the missed payments would be retroactively converted into a forbearance. The forbearance wouldn’t count toward student loan forgiveness under IDR plans or PSLF, and interest would still accrue, but borrowers would be spared the most draconian consequences of missed payments.

But the on-ramp period is set to end on September 30. After that, borrowers who miss student loan payments will again face potentially severe consequences, including negative credit reporting and late fees. Under federal law, borrowers can go into default after being 270 days past due (roughly the equivalent of nine months).

Related: 3 Ways to Get Out of Student Loan Default — And How to Avoid a Relapse

Fresh Start for defaulted student loan borrowers ends September 30

Borrowers who default on their federal student loans can face very serious consequences, such as substantial collections fees and penalties, as well as administrative collection actions, including wage garnishment, intercepts of federal and state tax refunds, and offsets of federal income streams such as Social Security. 

But under a program that parallels the on-ramp, defaulted federal student loan borrowers have enjoyed protections and options. “Fresh Start,” another temporary Biden administration program, has extended the freeze on collections activities against defaulted federal student loan borrowers associated with the Covid-19 forbearance. 

The Education Department has stopped reporting defaulted federal student loans to credit bureaus. And Fresh Start provides another pathway to default resolution, allowing borrowers to simply request that their loans be restored to regular repayment by enrolling in Fresh Start.

“Fresh Start automatically gives you some benefits, such as restoring access to federal student aid (loans and grants),” says Education Department guidance. “But you need to act to claim the full benefits of Fresh Start and get out of default.”

Steps to enroll in Fresh Start

Borrowers can enroll in Fresh Start by contacting their default loan holder:

• For government-owned federal student loans (including all Direct loans), this would be the Department of Education’s Default Resolution Group.
• For commercially-owned FFEL loans, this would be one of several guaranty agencies.

Borrowers can get more information on their current loan holders by logging into their StudentAid.gov account.

But like the on-ramp, Fresh Start is set to end on September 30. 

What happens if you miss the deadline?

After the September 30 deadline, borrowers who remain in default on their federal student loans can be subject to collections efforts again, including:

• Wage garnishment
• Social Security offset
• Seizure of federal and state tax refunds

In addition, the Education Department can reimpose collections fees, and report defaulted federal student loans to the national credit bureaus, damaging borrowers’ credit.

The good news is that borrowers who enroll in Fresh Start before the September 30 deadline can not only get out of default — they can also benefit from the IDR account adjustment. 

“Borrowers who exit default prior to the end of the Fresh Start period will receive the full benefit of the payment count adjustment and receive credit for periods in default from March 2020 through the month they exit default,” says department guidance.

“After the Fresh Start period, only borrowers who rehabilitate to leave default will benefit from the adjustment, but they will not receive credit for periods in default during the payment pause.”