Biden's Education Department just pushed back the deadline for student-loan borrowers to see debt relief through a one-time reform

Illustration of hand putting money into graduation cap.
Tommy/ Getty Images
  • The Education Department announced a one-time account adjustment for borrowers in PSLF and income-driven repayment plans.

  • In new guidance, the department pushed back the adjustment from July 2023 to 2024.

  • It comes as Federal Student Aid did not receive any additional funding to implement reforms to a series of debt relief programs.

It'll take a little longer than anticipated for student-loan borrowers to experience the benefits of a one-time reform through targeted debt relief programs.

In October, President Joe Biden's Education Department announced both temporary and permanent changes to the Public Service Loan Forgiveness program and income-driven repayment plans. Specifically, for the two programs, the department announced a one-time account adjustment that would give borrowers one more chance to have their accounts reviewed and updated appropriately, bringing them closer to loan forgiveness.

PSLF promises debt relief for government and nonprofit workers after ten years of qualifying payments, and IDR plans give borrowers affordable monthly payments based on their income with the promise of debt relief after at least 20 years. But both of the programs have kept some borrowers paying off debt for longer than necessary due to issues tracking payments, among other things. That's why the department is implementing a series of reforms.

According to new guidance on Federal Student Aid's website, though, the deadline for borrowers to receive relief through the account adjustment got pushed back. In October, FSA planned for borrowers to see adjustments by July 2023, but now, the guidance says borrowers can expect an update in 2024 — a delay of potentially more than a year.

Other borrowers who have made 240 or 300 months of payments through IDR, and 120 months of payments in PSLF, will have their loans forgiven in spring 2023, per the guidance. The adjustment is automatic, but borrowers with commercially held loans will need to consolidate their loans into the federal direct loan program by the end of 2023 to take part in the reform. More details on the IDR and PSLF changes can be found here.

The delay is likely caused by the minimal resources the Education Department has to implement a range of programs this year. Congress did not increase funding for FSA last year, meaning that on top of the changes to PSLF and IDR, the department also has to transition millions of borrowers back into repayment and prepare to implement Biden's plan to cancel up to $20,000 in student debt this year if the Supreme Court rules that the broad relief is legal.

And, along with the one-time account adjustments, borrowers are also waiting for the department to implement its new IDR plan, which will cut monthly payments for undergraduates in half and shorten the student-loan forgiveness timeframe. An Education Department official has previously acknowledged that the lack of FSA funding is a concern for the department with all that it has on its plate, and Republican lawmakers have continued to slam the proposed reforms, calling them too costly and even introducing legislation to block them from being implemented.

All borrowers can do right now is wait for updates from the department regarding the implementation of reforms — and of course, the Supreme Court's decision on broad debt relief.

Read the original article on Business Insider