What’s behind this deadline?

Borrowers with federal loans may qualify for cancellation, or credit toward cancellation, through a one-time U.S. Department of Education payment-count adjustment. This initiative is meant to correct past issues with loan servicing that prevented some borrowers with public service loans and income-driven plans from making payments that counted toward forgiveness. Under an income-driven plan, monthly payments are based on a borrower’s income and family size. Depending on the plan, any remaining loan balance could be forgiven after 20 or 25 years. But some borrowers complain that, after decades of payments, they still haven’t gotten loan forgiveness. Others failed to get the relief they thought they qualified for under the federal government’s Public Service Loan Forgiveness (PSLF) program. PSLF was created in 2007 to encourage public service work for a qualifying employer , such as a government agency or a not-for-profit university. After 120 qualifying monthly payments, the federal government is supposed to forgive the remaining balance. But the “qualifying” part of the promise has tripped up many borrowers, either because the type of loan they had wasn’t eligible, they weren’t in a specified income-driven repayment plan, or they weren’t working for a qualifying employer. Others complained that their loan servicers misled them about their eligibility for PSLF, or steered them to forbearance or deferral options, which kept them trapped in debt for decades. To correct this, adjustments are being applied to borrowers in the Direct Loans and Federal Family Education Loans (FFEL) held by the department. “If you have those types of loans we are processing it automatically,” a spokesperson for the department emailed. “But please note that only Direct Loans will have time credited toward PSLF.” More than 3.6 million borrowers are expected to receive at least three years of additional credit toward income-driven repayment forgiveness, according to the agency.

Who does the deadline affect?

The Education Department’s payment adjustment review is underway and is expected to be completed by July 1. “If you don’t have Direct Loans or ED-held FFEL loans by the time we run the adjustment, then we will not process the adjustment on your loans,” the agency said. So, if your loans aren’t federally managed, you need to apply to consolidate them into the Direct Loan Program by April 30. The agency also pointed out that only Direct Loans will have time credited toward PSLF. After you consolidate, your new loan becomes eligible for the adjustment, and payments you have already made may be counted toward loan cancellation, the agency said.

The adjustments are being applied to Direct Loans and FFEL. People with federally held student loans won’t have to do anything. However, borrowers with the following loans must consolidate first to be considered for payment adjustments:

Where should I go for the consolidation application?

You can apply online at studentaid.gov/loan-consolidation . You can consolidate multiple federal student loans into one loan at no cost. It can take at least 60 days to process a Direct Consolidation Loan application and disburse the new loan, according to StudentAid.gov .

How can I reduce the amount of debt borrowed for college?

The answer to this question is for the many families facing the May college choice decision. My husband and I have been where many families are this time of year. We put three children through college. We told our three children they could apply to any university they wanted. But, we stood fast to one rule — no debt for them or us, even if that meant staying close to home or attending community college for two years and then transferring to a four-year university. Granted, we had a lot working in our favor. We began saving for each kid when they were tiny tots, investing in 529 college savings plans for each. Two of our children received scholarship money. But even if no free money were on the table, we would not have sentenced them or ourselves to decades of education debt. If you feel you have no choice but to take out loans, try to limit the borrowing to what’s absolutely necessary. This might mean your child attends a school within commuting distance to avoid borrowing for room and board. Before you allow your teenager to sign loan documents, and before you get a Parent Plus loan, go to PewTrusts.org and read: “Borrowers Discuss the Challenges of Student Loan Repayment.” Even borrowers with income-based repayment plans report struggling to make their loan payments. During a focus group conducted by Pew Charitable Trusts, participants expressed gratitude for their college education, but they also shared some sobering experiences with paying back their student loans.

Personal Finance

Borrowers, don’t miss this important student loan forgiveness deadline

The deadline to consolidate student loans by April 30 is looming.

Advice by Michelle Singletary

Columnist

April 24, 2024 at 7:00 a.m. EDT

5 min

This is the season of college-related deadlines.

By May, colleges typically ask students to confirm which schools they will attend in the fall.

To be considered for federal student aid for the 2024-2025 academic year, applicants have to complete their Free Application for Federal Student Aid (FAFSA) form by June 30.

B.O.M. — The best of Michelle Singletary on personal finance

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My mortgage payoff story: My husband and I paid off the house in the spring of 2023 thanks to making extra payments and taking advantage of a mortgage recast. Even though it lowered my perfect 850 credit score and my column about it sparked some serious debate with readers, it was one of the best financial decisions I’ve made.

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