Episode Transcript
Brenton: [00:00:00] The Department of Education has released what they are saying are the final updates to the Income Driven Repayment Plan waiver. In this episode, we go through what those updates are and how to review your student Loan Aid data file to see how they impact you. Let's get started.
Brenton: Hello, my name is Brenton Harrison of Escape Student Loan Debt, and your host for the Escape Student Loan Debt podcast. In our most recent episode, I walked you through the steps of how to download your student Loan aid data file. And I told you that we'd be using that file or the sample version of it over the next few episodes.
And the reason I said that is because in recent weeks, the Department of Education has finally released the frequently asked questions document that gives more detailed descriptions of how they're going to handle the Income Driven Repayment plan waiver.
As a recap, there was a [00:01:00] public service Loan forgiveness waiver that gave retroactive credit to people who worked in public sectors who were seeking to have their loans forgiven under that program. And at the same time, there was a waiver that was announced called the Income Driven Repayment Plan Waiver.
And that waiver was to give retroactive credit, not for those necessarily in public service, but for those who are additionally trying to have their loans forgiven under the 20 or 25 years that are required for the Income Driven Repayment plans that we've discussed at this podcast ad nauseum.
So we've been waiting for this document to give these instructions, and now that it's finally been released, I wanna walk you kind of section by section through the document and then compare it to the student Loan aid data file so that you can see based on your Loan history, how it will apply based on the final guidelines.
You're looking on screen at studentaid.gov announcements about the Income Driven Repayment Plan waiver, and the first section says who this waiver is for. It applies to people who are on [00:02:00] an Income Driven Repayment plan now, or were on one in the past.
People who are in the public service Loan forgiveness program, or people who are not on an Income Driven Repayment plan, but are interested in being on that plan. And have either a direct Loan or an FFEL Loan that is held by the federal government. That's an important distinction. Throughout the podcast I've told you that the safest way to make sure you're eligible for these programs is to have direct loans only. But if you have an FFEL Loan or a Stafford Loan, you can in some cases receive credit as long as that Loan is held by the federal government. Unfortunately, the majority of FFEL loans are not held by the federal government.
They are backed by the federal government, but held by a private lender. So the advice still stands that in most cases it would benefit you to consolidate into a direct Loan if you have those older loans that are FFEL loans. But in this [00:03:00] waiver, there is the possibility that some of those old loans would be benefited by the program.
Now with this waiver, they're going to give retroactive one time credit to anyone with any Loan payment of any Loan type towards the 20 or 25 years forgiveness they would need under Income Driven Repayment plan. So even if you had the wrong type of plan, wrong type of payment that wasn't IDR, in this one time lookback, they're going to treat that payment as it counts towards that 20 or 25 year requirement.
Now after they apply these credits, there are really only three scenarios that could occur and they list them for you. The first scenario is that they have given you the past credits, but you still have more time until that 20 or 25 years is met to meet the requirement of having the loans forgiven.
And if that is the case, you would have to continue until that point is met On one of the Income Driven Repayment plans. They're giving you credit in the past, even if it wasn't on an Income, Driven Repayment plan. But after that adjustment [00:04:00] is made, if you still have time left, you do have to get on an Income Driven Repayment plan moving forward.
The second scenario is that when they give retroactive credits, you would have met your Repayment period of 20 or 25 years, and if that is the case, your loans will be automatically forgiven and we'll talk about when that will occur in a second.
And the third scenario actually speaks to the possibility that they give you enough credit that you have paid more than your 20 or 25 years. And if that is the case, they list in the waiver itself, that in those cases, in most cases, you'll receive a refund for any overpayments.
So now let's talk about timing. When is this going to occur? They actually addressed this in two different sections in the document, and they tell you which loans they're going to cover first. They will first review any loans that have been in Repayment long enough to qualify for Income Driven Repayment plan forgiveness.
So that's borrowers who have been in Repayment for either 20 or 25 years. [00:05:00] Now, that doesn't mean just because you've been in Repayment that long that you'll automatically have your loans forgiven. It just means that if they look at your Loan data and they see that it's already been 20 or 25 or 27 years, they're going to put you at the top of the pile of records they're reviewing the odds are obviously higher that you would qualify for automatic forgiveness than it would be if you only had 16 years of Repayment on your data file.
Now, for direct loans, they're going to give credit, not just towards Income Driven Repayment, which is the 20 or 25 years. If you were working in public service for any of that time, they will also give this retroactive credit to your public service Loan forgiveness requirements. So if you're pursuing that and you need 10 years worth of payments in the public sector, this will address that need as well.
Now next, how are they going to apply this credit? It is not just any payment towards any Loan type that will be given credit towards 20 or 25 years. They are also going to [00:06:00] give you credit, as we've discussed, for any periods of forbearance that exceeded 12 months consecutively or 36 months cumulatively.
I will say that the biggest area of opportunity in my mind for this is for someone who is a resident physician. Uh, a fellow as a physician, uh, a PhD professional who likely has significant periods of their training where maybe in residency they put their loans in forbearance for three years in a row.
That's actually not supposed to happen. You're only supposed to be able to do it for 12 months at a time. An even greater opportunity is if you were a surgical resident and then fellow and likely working for a public hospital that qualifies for public service Loan forgiveness, and you could have had your loans in forbearance for four or five or six years out of the 10 years that are needed for public service Loan forgiveness.
There is a scenario where All of those years, even though not a single dollar was paid towards the loans would count not just towards your 20 or 25 years under Income Driven Repayment, [00:07:00] but also the 10 years that you need to have them wiped away completely under public service Loan forgiveness.
In addition to this, they are going to give credit for any months spent in economic hardship or military deferments in 2013 or later, or any months spent in deferment prior to 2013 period, as long as it wasn't for in-school deferment.
And lastly, they will give credit for any time in Repayment or deferment or forbearance on loans that occurred before a consolidation event. It used to be before the Income Driven Repayment Plan waiver that if you are pursuing Income Driven Repayment plan forgiveness or public service Loan forgiveness and you consolidated a Loan or multiple loans, any payment you've made towards them before consolidation was wiped away and you had to start fresh. Now they are saying that if you consolidate your loans in pursuit of these options, not only will they give you credit for payments prior to consolidation.
That new Loan will get the credit of the oldest [00:08:00] consolidated Loan. This is huge. This means that if I have one student Loan that I've had for 20 years and it was $10,000, and then I have 15 other loans that I've only been paying on for two years. When I consolidate them in terms of my credit, towards the 20 or 25 years, I get to treat it as if I've been paying on that entire Loan bunch as long as I have for the oldest Loan in the basket.
If you have direct loans already and they apply this past credit and they see you have 20 or 25 years, you'll receive your forgiveness automatically. But if you have an FFEL Loan that's not held by the federal government, a Perkins Loan, a Health Education Assistance Loan, you have to apply to have these loans consolidated before they can give you your credit. And in order to do it in time for the waiver to be applied, this must be done before the end of 2023. So if you have any ineligible loans before December 31st, you have to put that consolidation application [00:09:00] in. Otherwise, those ineligible loans will not be treated under the rules of this one time adjustment.
And the last thing we'll cover before the break is the specific date and time, by which point they feel they'll be able to discharge all of those loans that qualify for automatic forgiveness.
If you are one of the people who are in that lucky bunch, where when they apply these rules, you have enough credit for your loans to be forgiven. They are saying that they expect to discharge your loans before August 1st of this year. Now if you qualify for automatic forgiveness, but you haven't seen your loans discharged by that point in time, August 1st, it doesn't mean you're outta luck. It just means that they're going to continue the process after August 1st.
But when they find out that you have overpaid, if there has been any overpayment, you would get a refund for any of those excess months.
And after the break, I'll show you how to find the date that you started repaying your loans directly from your student Loan data file.
[00:10:00]
Brenton: Welcome back. Before the break, we talked about the timeline, the number of people who would be approved, the details of that forgiveness, and now it's [00:11:00] time to show you how to find the date that you started repaying your loans and your oldest Loan on your student Loan data file. You have on the screen in front of you if you're following along with us on screen, a sample, aid data file. In our previous episode if you're not following along with us on screen, I told you how to access this for your own student loans. At the very top of this document, you're gonna see the date that this file was requested. Every single time you refresh it, it's going to give you a fresh date. It's going to give you your name and contact information on top, and it's also going to show you a little bit down the page, a section that says Student enrollment status code.
Now in this case, the status code for this borrower is graduated. They are no longer enrolled, and the next line says Student enrollment status effective date. So this is telling me when this person was listed as graduated in the system, and it says April 29th, 2013.
So this is the first date in mind that I would think they would have around [00:12:00] this period, or six months later after their grace period, a Loan that might have gone into Repayment that would count towards their 20 or 25 years. So now that I see this date, April 29th, 2013, I can go further down the page and I can see a listing of every student Loan they ever took out. I can then, after seeing the total listing, Go Loan by Loan and find the date that they started repaying each one.
So for the first Loan as an example, and we won't go through all of 'em, it says the Loan Repayment plan begin date was October 30th, 2013.
I covered in the most recent episode how you can go in each Loan and you can see the history of when it was in a grace period, when it was in Repayment. When it was in forbearance, and if there's a period that exceeds 12 months consecutively in forbearance or 36 months cumulatively, that would key that person in to know that they could have some credits above and beyond those boundaries that will be applied to their credit as well.
[00:13:00] So we're not gonna spend a ton of time in this document because we'll be covering over the next several episodes. But now that you know the guidelines for the Income Driven Repayment Plan Waiver, the takeaway for the document of your student aid data file is to find the date that you were listed as graduated.
Probably six months later would be the first time that you would likely have an eligible Loan payment. Look at the listing of your student loans and see all of the history of the ones that you've taken out, and then go Loan by Loan to look at the payment history for each of those loans and try to calculate your own running tab of how much credit you should receive. And even though you might be off by a few months or so, if you have an understanding of these rules as these credits are applied, and for some people it won't be until next year if they don't qualify for automatic forgiveness, you can at least have an idea of how close you are to that line in the sand, at which point your loans will be wiped away . And you'll have more knowledge on your way to having your student loans forgiven, reduced, [00:14:00] reorganized, or expedited.
And in the next episode, we'll dig even further into this to give you an idea if you don't have your loans automatically forgiven, of what your payments will be when they restart, and how you can optimize them to make sure they work for you. See you then.
