More Student Loan Borrowers Can Benefit from One-Time Adjustment If They Take These Steps Before April 30

Several more student loan borrowers can get their loans canceled or get more credits towards their debt cancellation under the Income-Driven-Repayment (IDR) plan. The U.S. Department of Education is set to conduct a one-time adjustment this summer which could provide several borrowers more credits to qualify for cancellation. However, they must take certain steps by the end of this month to get their debt canceled sooner than they would have otherwise, the Consumer Financial Protection Bureau said.

Borrowers who comply with the requirements before  April 30 will qualify for the one-time payment count adjustment that will provide the credits toward forgiveness under the IDR plans or Public Service Loan Forgiveness (PSLF) programs.

Here's How IDR and PSLF Can Help Borrowers

The Department of Education is providing more credit toward forgiveness, which will forgive any remaining loan balance for borrowers who make payments for 20 or 25 years. The adjustment can add up to three years of credit for borrowers whose loans were in deferment or forbearance, and in several other circumstances as well.

Borrowers who may not qualify for cancellation right now can get help from the IDR program to lower their monthly payments. The IDR program adjusts the borrowers’ monthly payments based on their income and family size and not their loan balance. The department is also adjusting counts under the PSLF, which forgives loans for people who make payments while working for a government agency or a nonprofit group for 10 years.

Steps to Take Before April To Qualify for Student Loan Cancellation

To get the most credits toward loan cancelation, borrowers with federally managed loans listed below must consolidate them into a single larger loan.

The federal loans that are eligible for the program include Commercially held Federal Family Education Loan (FFEL). Parent PLUS loans, Health Education Assistance Loan (HEAL) Program loans, and Perkins loans.

Borrowers can apply for a Direct Consolidation Loan at StudentAid.gov or with their respective loan servicer.

Following this, the Debt Consolidation Loan will be eligible for the one-time adjustment and the payments made towards the loans up to this point will be counted toward loan cancellation.

Following this, applicants need to enroll in the IDR program at StudentAid/IDR to continue receiving credits after April 30.

Some Considerations Before Debt Consolidation

Elaine Rubin, director of corporate communications at Edvisors suggested borrowers to get a complete payment history of each loan before consolidation, in a CNBC report. This will be to make sure that borrowers are getting the full credits they are entitled to.

Borrowers can get the history of their payments at StudentAid.gov by looking into their loan details or asking for a complete record from their loan servicer.

For borrowers who have a Parent PLUS loan managed by the Department of Education and at least 25 years (or 300 months) in repayment, their loan will be automatically canceled through the one-time adjustment offered under the program.

However, if borrowers don’t have 25 years in repayment, they should consolidate their Parent PLUS loan before the April 30 deadline to maximize the benefit and lower their repayment amount.

Beware of Scammers

The CPFB has also warned borrowers of scammers charging them for consolidating their loans. Borrowers are not required to pay a fee for consolidation, for lowering their monthly repayments of loans, or for getting their loans canceled. Borrowers can easily do it for free on the Department of Education’s website and they can contact their servicer, for further help.