Delays in Student Loan Debt Relief Programs: Targeted Reforms Postponed to 2024

The Department of Education’s targeted debt relief programs that aimed to bring borrowers closer to loan forgiveness have encountered another setback, as the timeline for relief has been pushed back yet again. The delay could mean borrowers may have to wait until 2024 to receive an account update from the department. The news comes just months after the Education Department announced temporary and permanent changes to Public Service Loan Forgiveness (PSLF) and income-driven repayment (IDR) plans.

The reforms were designed to help alleviate the stress of student loan debt on borrowers. The PSLF program promises debt relief for government and nonprofit workers after ten years of qualifying payments, while IDR plans offer borrowers affordable monthly payments based on their income, with the promise of debt relief after at least 20 years. Unfortunately, issues tracking payments have kept some borrowers paying off debt for longer than necessary.

In October of last year, the Education 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. However, according to new guidance on Federal Student Aid’s website, the deadline for borrowers to receive relief through the account adjustment has been pushed back yet again. Initially planned for July 2023, borrowers can now expect an update in 2024, potentially delaying relief by over a year.

The delay is likely due to a lack of resources available to the Education Department to implement the range of programs this year. Congress did not increase funding for FSA last year, which means the department has to transition millions of borrowers back into repayment, 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 implement reforms to PSLF and IDR programs. 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.

Despite the delay, borrowers who have made 240 or 300 months of payments through IDR, and 120 months of payments in PSLF, will still have their loans forgiven in spring 2023, according to 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.

The Department of Education has also been implementing a new IDR plan that will cut monthly payments for undergraduates in half and shorten the student loan forgiveness timeframe. The lack of FSA funding and the department’s overloaded workload have raised concerns about the effectiveness of the reforms. Republican lawmakers have also criticized the proposed reforms, calling them too costly, and even introducing legislation to block them from being implemented.

In October, the Biden administration announced executive actions that would bring most loans managed by the Education Department “closer to forgiveness.” These actions would include credit toward the PSLF program for borrowers who have qualifying employment, according to the Education Department. However, the delay may cause further frustration for borrowers waiting to benefit from the reforms.

Despite the challenges, the Department of Education is working to provide updates and implement the reforms to alleviate the burden of student loan debt on borrowers. Borrowers will have to continue to wait for updates from the department regarding the implementation of the reforms and the Supreme Court’s decision on broad debt relief.