IDR Waiver Complete Guide (2023)

If you’re a student loan borrower paying back your federal student loans using an income-driven repayment plan (IDR plan), the Biden Administration’s IDR waiver is a big deal. Any time in repayment and many periods of forbearance or deferment can now be counted towards the 10 year Public Service Loan Forgiveness and 20 to 25 year Income Driven Repayment forgiveness programs.

Perhaps millions of borrowers could see their entire balances wiped away completely. But unfortunately, many borrowers will need to take action by the Administration’s December 31, 2023 deadline.

We will cover what you need to know about President Biden’s IDR Waiver program and how you could use it to shave years or even decades off of your student loan repayment journey.

If you need a customized plan to make the most of the IDR Waiver, book a time with one of our top-rated student loan consultants.

What is the IDR waiver?

The U.S. Department of Education is using its broad authority over student loans, due to the pandemic national public health emergency, to provide extraordinarily generous changes to specific forgiveness programs that could get you out of student loan debt years sooner (or even immediately).

The Department of Education previously enacted a Public Service Loan Forgiveness (PSLF) program Waiver. Under this program, which was announced in October 2021 and expired at the end of October 2022, prior payments before consolidation count.

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

With the IDR waiver, the administration is trying to broaden that help to a much larger group of borrowers and repayment statuses.

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

All borrowers can now receive credit towards IDR forgiveness for any type of repayment plan as well as qualifying forbearance periods and some types of deferment. More on that soon.

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

The deadline for consolidation to take advantage of these benefits is December 31, 2023. Due to potential legal challenges against the waiver, we urge borrowers with commercially-held FFEL loans to consolidate immediately.

If you have loans that were not paused during the pandemic that show up when you login to studentaid.gov, then you have commercially-held FFEL loans.

If you have this type of loan, you should probably consolidate all of your debt together before the deadline. Doing so could bring you very close to having your entire balance forgiven under these new rules.

The IDR waiver covers borrowers working in the public AND private sector

The PSLF waiver only applied to borrowers in the public sector or who used to work in the public sector.

The IDR waiver applies to ALL borrowers with federal student loans.

For borrowers pursuing PSLF, you can get credit towards your 10 year time requirement.

For borrowers not pursuing PSLF, you can receive credit towards student loan forgiveness programs, like IDR forgiveness, over 20 and 25 years.

For example, if you have paid on your undergraduate loans since 2006 and work in the private sector, you could consolidate before December 31, 2023 under the IDR waiver and receive up to 17 years of IDR payment credit towards 20-year forgiveness under the Revised Pay As You Earn (REPAYE) plan.

You would only need three additional years of payments on an IDR plan, and your balance could be completely forgiven.

A physician who deferred her loans during residency for four years can get all four of those years counted towards the PSLF program now, thanks to the IDR waiver.

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

One Minor IDR Waiver Caveat for PSLF Borrowers

There’s one minor limiting factor about the IDR Waiver that I can find, and it only affects public sector borrowers. To receive total forgiveness for PSLF under the IDR waiver rules, you must be working for a qualifying employer when the Department of Education makes the account adjustment to your forgiveness credit.

The PSLF Waiver did not require you to be at a qualifying employer when they wiped your debt, so that’s slightly less generous.

Most Deferment and Forbearances Now Qualify for Forgiveness

PSLF and IDR borrowers will receive credit towards forgiveness if they were in more than 12 months of consecutive forbearance or 36 months of cumulative forbearance.

If you have less than 12 consecutive months of forbearance or 36 months or less of aggregate forbearance, then this credit would not 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 cannot identify who was in economic hardship deferment and who was not. So, they’re giving credit for all types of deferments.

For deferments after 2013, you needed to be in a specific type of deferment, such as active duty deferment or economic hardship deferment. Most types of deferment will qualify without a time requirement, as with the forbearance 12 months consecutive/36 months aggregate rule.

Notably, you can consolidate and still receive credit for qualifying deferments and forbearances before the consolidation.

Time in Any Repayment Plan Now Qualifies for Forgiveness

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

As an example, consider a borrower who has paid her loans under the Extended Repayment Plan since 2002. She would normally receive zero credit towards IDR forgiveness, since the Extended Repayment Plan is not income-based.

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

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

Most all Payment Statuses Pre-Consolidation Now Qualify

Borrowers who made payments pre-consolidation can now get credit too.

It appears that the Department of Education is following the same game plan as they did for the PSLF waiver, with borrowers getting credit for the loan with the most amount of monthly payments applied to their overall consolidation loan.

Many borrowers can consolidate older loans along with graduate degree loans and get much faster credit toward forgiveness overall.

The IDR Waiver is even better than the PSLF Waiver, as forbearance and deferment pre-consolidation also can count.

Most Borrowers with FFEL loans from Before 2010 Need to Take Action

Borrowers with commercially-held FFELP loans urgently need to consolidate before the deadline to qualify for the IDR waiver.

This is because program requirements prevent the Department of Education from granting credit automatically on this type of loan.

It’s also possible that we will see a lawsuit from investors block relief for this type of loan.

As stated earlier, If you were still required to make payments during the student loan payment pause despite your student debt showing up on the Federal StudentAid.gov website, then you have this kind of student loan, and you need to consolidate to receive credit under the IDR waiver.

A lawsuit could block this benefit for borrowers with this type of loan, so you should consolidate immediately if you want to secure this IDR waiver benefit (if you have commercially-held FFELP loans).

Will the IDR waiver bring cancellation relief to millions?

According to NPR, 4.4 million borrowers have been in repayment for at least 20 years. This is the minimum threshold to receive IDR forgiveness.

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

According to the Department of Education, “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.”

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.

We believe the Department is being extremely cautious on how much the program could save borrowers, in case it were to draw legal opposition.

You should know as many as several million borrowers could receive complete cancellation of their student loans thanks to the IDR waiver.

Until 2026, any cancellation is free from any federal taxation as well. A handful of states (perhaps four) could impose state income tax; so consult with a tax advisor about this aspect.

Could the IDR waiver be subject to legal challenge?

The 118th Congress was sworn in on January 3, 2023. The PSLF waiver did not face resistance legally. This could be in part due to sympathetic stories from service members featured on programs such as 60 Minutes, who were denied benefits under the program.

Most of the benefits of the IDR waiver will be given out in 2023 under this new Congress.

Could the new Congress sue to block aspects of this program? They tried to retroactively take back benefits through a Congressional Review Act joint resolution, but that effort failed.

No other serious lawsuits blocked the PSLF Waiver, so it stands to reason the IDR Waiver would be allowed to stand.

We think borrowers with commercially-held FFEL loans face the most legal risk, as a lawsuit from an investor or group of investors might potentially block their access to this relief program.

Other borrowers can likely feel more secure knowing the PSLF waiver provided over $20 billion in benefits without succumbing to legal challenges.

Get the Most Out of the IDR Waiver for Your Situation

This IDR waiver could potentially accomplish a very large amount of debt cancellation. Some of that cancellation will be immediate, but much of it will also occur over the next several years, as borrowers hit their 10, 20, and 25 year forgiveness counts, depending on what program they’re eligible for.

Many borrowers will see their accounts updated with a one-time revision late this year or early next. But if you could obtain forgiveness under the IDR program waiver before then, your application could be processed much sooner.

For example, if forbearance and deferment, along with your payments, puts you above 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.

Many borrowers will want to consolidate to get the full benefits of the IDR Waiver. But others who have low IDR payments locked in until 2024 or even 2025 thanks to the student loan pause extensions should not take any action.

What’s clear is that the IDR waiver creates a massive number of opportunities for borrowers to save money, and most borrowers are unaware of the possibilities for savings due to not understanding all the rules.

We can help optimize your loan repayment strategy under the IDR waiver if you want that assistance. Feel free to use tips from this article as well to get the most forgiven under this IDR account adjustment temporary program. It’s possible we will not see another opportunity like this for student loan borrowers for years to come.