FILE - Arizona State University graduate students are silhouetted during their graduation at Sun Devil Stadium May 13, 2009, in Tempe, Arizona. (Photo by Joshua Lott/Getty Images)
WASHINGTON - A key deadline for some student loan borrowers to benefit from debt forgiveness was extended this week by the Biden administration.
Eligible borrowers who request loan consolidation – or combining multiple federal student loans into one new federal loan with a single monthly payment – by June 30 could qualify for some debt forgiveness immediately, or receive credit toward loan forgiveness.
The move is part of a one-time adjustment this summer from the U.S. Department of Education.
The previous deadline to consolidate student loans and qualify for the account adjustment was April 30.
"The Department is working swiftly to ensure borrowers get credit for every month they’ve rightfully earned toward forgiveness," U.S. Under Secretary of Education James Kvaal said in a statement on Wednesday.
More than 3.6 million borrowers with Direct Loans will receive at least three years of credit toward loan forgiveness, and many will see their loans forgiven automatically, officials said.
The move is part of the Biden administration's push to provide student debt relief after his one-time student loan cancellation was blocked by the U.S. Supreme Court.
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The Education Department said the adjustment, which is currently underway and will continue through the summer, is intended "to more accurately reflect borrowers’ payment counts."
Why is the Education Department making one-time adjustments?
Student loan borrowers who are on an income-driven repayment plan or are working toward Public Service Loan Forgiveness can have their loans forgiven after making the required number of payments. For borrowers on income-driven repayment plans, that's after 20 or 25 years.
In the past, there were "a variety of reasons why some months may not have been credited toward loan forgiveness," the Education Department said last month.
For example, there may have been months when the borrower was on a payment plan that wasn’t eligible.
"With this payment count adjustment, we will change whether certain payments or months are credited toward your loan forgiveness," the Education Department said.
Depending on the status of loan repayment, officials said the change will result in one of the following for eligible borrowers:
- Borrowers still have more time left until the end of their repayment period. They will be closer to the end of their repayment period and closer to forgiveness.
- Borrowers reach the end of their repayment period. They will automatically receive loan forgiveness.
- Borrowers have more than the number of months required in their repayment period. In most cases, they'll receive a refund for any overpayment.
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The Education Department said it expects that the payment count adjustment will be completed by Sept. 1, 2024.
Any adjustments will be automatically applied to all Direct Loans, which include Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans.
They will also be applied to Federal Family Education Loan (FFEL) Program loans that are currently managed by the Education Department, which includes Direct Consolidation Loans that repaid a privately held Perkins or FFEL Program loan and that are disbursed before the adjustment occurs.
But first, the Education Department said borrowers with Direct Loans and FFEL Program loans should consolidate them to get the most credit toward cancellation.
Those who wish to consolidate their loans in order to get the benefit of the adjustment must submit a loan consolidation application by the new June 30, 2024 deadline.
"Please note that submitting a consolidation application alone does not guarantee any benefits under the payment count adjustment. In general, it takes at least 60 days to process a Direct Consolidation Loan application and to disburse the new loan," the department states on its website.
This story was reported from Cincinnati.