IDR Waiver: When Adjustments Will Be Made and How To Verify Your Adjusted Credit

If you're a student loan borrower paying back your federal student loans using an income-driven repayment (IDR) plan, the Biden Administration's IDR waiver, also known as the IDR account adjustment, was a big deal. Although it expired on June 30, 2024, it provided huge benefits: any time you've spent in repayment and many periods of forbearance or deferment could count toward the 10-year Public Service Loan Forgiveness and 20- or 25-year IDR forgiveness programs.

Millions of borrowers could see their balances wiped away completely. The IDR waiver/IDR account adjustment was unexpectedly extended on May 15, 2024, after it had theoretically already expired on April 30, 2024. However, the program ended for good on June 30, 2024.

Here's everything you need to know about President Biden's IDR waiver program.

If you need a customized plan to verify you got the right IDR waiver credit, book a time with one of our top-rated student loan consultants.

When will the IDR waiver account adjustments be complete?

The Department of Education originally set a deadline of September 1, 2024, to complete the IDR waiver adjustments in borrowers' accounts. However, this deadline was missed as not all borrowers have seen adjustments made yet, and the Department of Education hasn't provided an updated deadline.

We now expect that IDR Waiver adjustments will be made by January 2025. This is the end date of the Biden administration, so it stands to reason they'll want to complete the adjustments by the end of Biden's term.

How do you ensure your payment counts are adjusted correctly

Once your payments are updated, you'll want to ensure you were given proper credit. While we don't know the frequency or likelihood of errors, there's almost certainly a chance that mistakes could be made.

For many borrowers who consolidated, you typically need to look at the date of your oldest loan and the total monthly payments due for that loan while in repayment, not including forbearance or deferment (with exceptions noted below).

For borrowers who didn't consolidate, each loan will assessed individually.

Verifying these payment counts can be tricky, so we recommend booking a time with one of our student loan consultants to ensure you've received the proper credit.

Do deferment and forbearance periods qualify for loan forgiveness under the IDR waiver?

PSLF and IDR borrowers are set to receive credit toward forgiveness if they had more than 12 months of consecutive forbearance. The same applies if you had 36 months of cumulative forbearance.

If you had less than 12 consecutive months of forbearance or 36 months or less of aggregate forbearance, then this credit doesn't qualify. In this case, you need to file a complaint with the FSA Ombudsman to review your situation.

Deferment before 2013 also counts for IDR and PSLF forgiveness, excluding in-school deferment. This is because the Department can't identify who was in economic hardship deferment and who wasn't. So, they're giving credit for all types of deferments.

For deferments after 2013, you must've been in a specific type of deferment. For example, active-duty deferment or economic hardship deferment are eligible. Most types of deferment qualify without a time requirement, as with the forbearance 12-month consecutive/36-month aggregate rule.

Notably, you could have consolidated and still receive credit for qualifying periods of deferments and forbearances before the consolidation.

Great news: Time in any repayment plan now qualifies for forgiveness

The IDR waiver gave borrowers credit for any repayment plan toward IDR forgiveness, even payments made prior to consolidation.

For example, consider a borrower who paid her loans under the Extended Repayment Plan since 2002. Since the Extended Repayment Plan isn't based on income, she would normally receive zero credit toward IDR forgiveness.

But under the IDR waiver, she could get credit for all those now-qualifying payments and either have her loans completely forgiven or be very close to forgiveness.

If she had loans with different payment histories, she could consolidate to get a very large amount of IDR credit on the new Direct consolidation loan based on the old repayment history of her oldest loan.

Most payment statuses pre-consolidation qualify

Borrowers who made payments pre-consolidation could get credit, too.

The Department of Education appears to be following the same game plan as it did for the PSLF waiver. Borrowers received credit for the loan with the most monthly payments applied to their overall consolidation loan.

Many borrowers could have consolidated older loans and graduate degree loans to get much faster credit toward forgiveness overall.

The IDR waiver was even better than the PSLF waiver, as forbearance and deferment pre-consolidation could also count toward loan forgiveness.

What is the IDR waiver?

The IDR waiver was a one-time account adjustment by the Department of Education. It gave federal student loan borrowers credit toward forgiveness. All Direct Loan program borrowers, including graduate and Parent PLUS Loan holders, will receive at least three years of credit toward forgiveness.

Millions of borrowers who had been repaying their student loans for more than 20 years will automatically receive student loan forgiveness with this account adjustment (more on this below).

To do this, the U.S. Department of Education used its broad authority over student loans due to the pandemic national public health emergency. It results in extraordinarily generous changes to specific forgiveness programs that could get you out of student loan debt years sooner (or immediately).

The Department of Education previously enacted a Public Service Loan Forgiveness (PSLF) program waiver. Under this program, announced in October 2021 and expired at the end of October 2022, prior payments before consolidation were counted for loan forgiveness.

Payments made under any repayment plan counted, too, as long as you worked full-time for a nonprofit or government employer during the period in question.

The IDR account adjustment applied to a huge group of borrowers

With the IDR waiver, the Administration expanded assistance to a much larger group of borrowers and repayment statuses.

The PSLF waiver only helped public servants. Plus, it only awarded credit for the time a borrower was in an actual repayment plan.

The IDR waiver allowed all borrowers the chance to receive credit toward IDR forgiveness for any type of repayment plan, as well as qualifying forbearance periods and some types of deferment.

Like the PSLF waiver, borrowers with commercially-held debt with the Federal Family Education Loan program (FFEL) needed to consolidate to qualify.

The deadline for consolidation to take advantage of these benefits was June 30, 2024.

Who will benefit from the IDR waiver?

The PSLF waiver only applied to borrowers in the public sector or who used to work in the public sector. But the IDR waiver expanded to ALL borrowers with federal student loans, meaning both private- and public-sector workers can benefit.

Borrowers pursuing PSLF could get credit toward their 10-year time requirement.

Borrowers not working toward PSLF could receive credit toward student loan forgiveness programs, like IDR forgiveness, over 20 or 25 years.

For example, if you had been paying toward your undergraduate loans since 2006 and worked in the private sector, you could have consolidated before June 30, 2024, under the IDR waiver. This could have made you eligible to receive up to 17 years of IDR payment credit toward 20-year forgiveness under the Saving on a Valuable Education (SAVE) plan (formerly REPAYE).

This credit left many borrowers with only three additional years of payments on an income-driven repayment plan. Then, your loan balance could be completely forgiven.

Thanks to the IDR waiver, a physician who deferred her loans during residency for four years could have all four years counted toward the PSLF program.

These examples show how the IDR waiver could have helped all types of borrowers regardless of employment status.

One minor IDR waiver caveat for PSLF borrowers

There was one minor limiting factor about the IDR waiver that I could find, and it only affected public sector borrowers. To receive total forgiveness for PSLF under the IDR waiver rules, you must work for a qualifying employer when the Department of Education makes the IDR account adjustment to your forgiveness credit.

The PSLF waiver didn't require you to work for a qualifying employer when they wiped your debt. So, that's slightly less generous.

Related: How to Know If You Need a Consult with Student Loan Planner: 7 Situations to Consider

Who will receive loan cancellation relief with the IDR waiver? Likely millions

According to the Department of Education, 3.4 million borrowers had been in repayment for at least 20 years, which is the minimum threshold for receiving IDR forgiveness.

Most of these borrowers did not qualify for Pay As You Earn. Therefore, most would probably have to seek forgiveness under the SAVE plan rules. It allows for forgiveness after 20 years for undergraduate loans and 25 years for graduate loans.

“Several thousand borrowers with older loans will also receive forgiveness through IDR. More than 3.6 million borrowers will receive at least three years of additional credit toward IDR forgiveness,” said the Department of Education.

Saying “several thousand borrowers” and “at least three years of additional credit” is one of the biggest understatements in the history of the student loan program.

Million borrowers will receive complete cancellation thanks to the (now-expired) IDR waiver.

Tax implications of forgiveness under the IDR waiver

Until 2026, any cancellation is free from any federal taxation.

If you received forgiveness thanks to the IDR waiver within a few years of 2026, you might want to consult a tax advisor on ways to mitigate this potential tax impact. We expect taxation of canceled and forgiven debt will depend on the outcome of the 2024 election.

A handful of states could impose state income tax, so consult a tax advisor if you live in any of the following states below if you received forgiveness under the IDR waiver:

• Indiana
• Minnesota
• Mississippi
• North Carolina

Why the IDR waiver did not face a successful legal challenge

The IDR waiver avoided any serious legal challenges.

We think borrowers with commercially held FFEL loans could have faced the most legal risk, as a lawsuit from an investor or group of investors could have blocked their access to this relief program.

We believe the lack of a successful conservative legal challenge to the IDR waiver was that conservative groups needed a large enough payoff politically to justify going after the Biden administration in court. And blocking the IDR waiver would have been too technical and confusing to warrant a huge amount of effort to stop.

Get the most out of the IDR waiver for your situation

This IDR waiver enabled a very large amount of debt cancellation for many borrowers. Some cancellations were immediate. But much of it will also occur over the next several years as borrowers hit their 10-, 20-, and 25-year forgiveness payment counts, depending on the program they're eligible for.

Many borrowers will see their accounts automatically updated with a one-time revision by early 2025. The Department of Education is instructing student loan servicers to make this update to your account. But your application could have been processed much sooner if you obtained forgiveness under the IDR waiver before then.

For example, if forbearance and deferment, along with your payments, puts you above the 120 months needed for the PSLF program, you could fill out the PSLF ECF form and check whether you qualify immediately.

You could follow a similar process for 20- or 25-year IDR forgiveness, but with only a consolidation.

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