One-time Account Adjustments are Key for Loan Forgiveness

The Department of Education is still conducting one-time account adjustments and extended the consolidation deadline to April 30, 2024. The article below shares the key information about one-time account adjustments. Read on and make sure you consolidate ineligible loans before April 30th, 2024 if needed.

What are one-time account adjustments?

One-time account adjustments mean borrowers who have been paying on their student loans for 20-25 years or more could qualify for student loan forgiveness now. The one-time account adjustments will count all past student loan payments (back to 1994) as if they were made on an income-driven repayment plan. They will also count periods of ‘excessive forbearance’ as if they were income-driven payments. Excessive forbearance is more than 12 consecutive months or 36 or more total months of forbearance.

Who are one-time account adjustments helpful for?

These adjustments are potentially helpful for all borrowers because it can bring them closer to student loan forgiveness. The adjustments are MOST helpful for borrowers who have been making payments on their student loans for over 20 years. One-time account adjustments have already led to student loan forgiveness for more than 800,000 borrowers. The adjustments are helpful for Parent PLUS loan borrowers too.

Borrowers who have loans from different time periods can benefit by consolidating them all together to receive the maximum payment count on the new consolidation loan. Here’s an example to highlight this benefit. A borrower has been paying on their undergraduate loans for 19 years and their graduate loans for 5 years and applies for a Direct Consolidation Loan. Their new Direct Consolidation loan will be credited with 228 months (19 years) of payments and will include the undergraduate loans. Since this new loan has graduate loans, it will be eligible for loan forgiveness after 6 more years of income-driven payments. The borrower would’ve had 20 years of additional income-driven payments to get the graduate loans forgiven without consolidation.

Which student loans are eligible for the adjustments?

Only federal Direct student loans or FFEL loans held by the Dept of Education are eligible. For eligible loans, account adjustments are automatic and you don’t need to do anything. ALL federal student loans can be made eligible for adjustments via consolidation. That means if you have FFEL, Perkins or HEAL (health education loans), you can consolidate to a Direct Consolidation Loan before 4/30/2024 to take advantage of one-time account adjustments.

When should I consolidate my ineligible loans to make them eligible?

If you have ineligible FFEL, Perkins, HEAL, or other non-direct federal student loans, you must complete your Direct Consolidation loan application by April 30th, 2024. Submit your application by the deadline to ensure you’re included in one-time account adjustments.

Where do I go to complete a Direct Consolidation application?

Log in to your federal student aid account at studentaid.gov and complete the Direct Consolidation Loan application. The application takes around 5-10 minutes to complete.

Select all the loans you want to consolidate and choose a repayment plan. If you haven’t made 20-25 years of student loan payments (or 10 years while eligibly-employed for PSLF) be sure to choose one of the income-driven repayment plans (SAVE is likely the best option) as part of your application.

I’m a Parent PLUS borrower, do one-time account adjustments help me?

Yes, one-time account adjustments include parent borrowers! If you already have a Direct Parent PLUS loan, one-time account adjustments will automatically be applied. If you have FFEL Parent PLUS loans, you will need to apply for a Direct Consolidation Loan.

Consolidating your Parent PLUS loans with your own loans can be a helpful way to get credit for years of payments toward your Parent PLUS loans. There’s a double consolidation loophole for parents with more than one federal loan to access the more affordable SAVE plan. This article by the Office of the Massachusetts Attorney General clearly explains the double consolidation loophole.

If you have only one Parent PLUS loan you can still benefit from consolidation but will need to participate in the income-contingent repayment plan (ICR) to make forward progress on loan forgiveness if you haven’t already paid for 25 years.

When will I see one-time account adjustments applied?

The Dept of Ed started sending forgiveness notices in July 2023. They are continuing to identify borrowers eligible for forgiveness and sending forgiveness notices at least every two months for borrowers who have made enough payments to receive loan forgiveness. The Dept of Ed is identifying borrowers pursuing PSLF who qualify for forgiveness monthly. The Dept of Ed expects to have made all account adjustments by July 2024 for all remaining borrowers.

Helpful Links

Account Adjustments Bring You Closer to Student Loan Forgiveness

Direct Consolidation Loan Application

Consolidate FFEL Loans to Direct Loans for Maximum Benefit

Dept of Ed: 7 Things to Know About the Student Loan Payment Count Adjustment

Office of the Massachusetts Attorney General Double consolidation loophole for Parent PLUS borrowers