Are direct consolidation loans eligible for forgiveness

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Income-Driven Repayment Plan (IDR) and Public Service Loan Forgiveness (PSLF) One-Time Account Adjustment Opportunities for FFELP Loans

IDR Plan Waiver

Temporary Changes to the IDR Plan Program

On April 19, 2022, the U.S. Department of Education (ED) announced several changes and updates related to IDR plans to include adjustments to borrower accounts, several one-time loan forgiveness actions, and new policies. Currently, these adjustments will be made to only Direct Loans and federally held Federal Family Education Loan Program (FFELP) Loans.

All FFELP loans serviced by AES are commercially held; however, you may be able to benefit if your FFELP Loans serviced by AES are consolidated into a Direct Consolidation Loan. You must apply for the Direct Consolidation Loan no later than May 1, 2023. Before consolidating, you should consider the pros and cons of Direct Loan consolidation. Please refer to Federal Loan Consolidation for additional information.

Refer to the StudentAid.gov website for additional information on the IDR opportunities.

Frequently Asked Questions About the Temporary IDR Waiver

• What exactly will happen to my FFELP Loans if I consolidate my loans into a Direct Loan Consolidation?

  The following actions will occur:

  All borrowers with loans held by ED (Direct Loans and federally held FFELP Loans) who have accumulated time in repayment for at least 20 or 25 years will see automatic forgiveness of their loans. Other borrowers will receive a one-time adjustment to their account that may increase the number of payments counted toward IDR forgiveness. This adjustment will count:

  • Any month a borrower was in repayment status, regardless of whether the payments were late, partial, loan type, or repayment plans
  • Months while a borrower spent at least 12 months in a consecutive forbearance
  • Months while a borrower spent at least 36 cumulative months in forbearance
  • Any month spent in deferment prior to 2013 other than in-school deferment

• Do these changes impact only Direct Loan borrowers? What about FFELP borrowers?

  The changes that will update IDR counts will impact both Direct Loans and federally managed FFELP Loans. Commercial FFELP borrowers, such as those borrowers with loans serviced by AES, seeking to take advantage of these changes must consolidate their commercial FFELP Loans into a Direct Consolidation Loan before May 1, 2023. Once the consolidation is complete, IDR payment counts will be updated for that loan in approximately July 2023.

• Is there any action I need to take as a borrower?

  Yes, you need to consolidate your FFELP Loans into a Direct Consolidation Loan to take advantage of any benefits under this announcement. Keep in mind, you must take action and consolidate by May 1, 2023.

  In addition, you should continue to check StudentAid.gov for the latest updates.

• Do these changes to the IDR plan impact only borrowers who have been, or currently are on, an IDR plan?

  No, these changes will impact all borrowers no matter their current or previous repayment plan.

• Are there any tax implications for having my loans forgiven based upon these changes?

  Loans forgiven through IDR do not create any tax liability for the borrower because of the American Rescue Plan Act. Specifically, the law states that student loans that are discharged (forgiven) between December 31, 2020, and January 1, 2026, will not be subject to taxation.

PSLF and Additional One-Time Adjustment Information

On October 25, 2022, ED confirmed that periods that are qualifying under the IDR waiver opportunity will also count toward PSLF provided the borrower certifies qualifying employment during those periods. These one-time account adjustments are expected to be completed in July 2023 and borrowers who miss the limited PSLF waiver deadline of October 31, 2022, can still get additional qualifying periods under this one-time account adjustment. Borrowers with commercially held FFELP loans can benefit from this opportunity by applying for direct loan consolidation no later than May 1, 2023. For more information, please visit StudentAid.gov.

All federal loans serviced by AES are commercially held FFELP; however, you may be able to benefit if your FFELP Loans serviced by AES are consolidated into a Direct Consolidation. You must apply for the Direct Loan Consolidation no later than May 1, 2023. Before consolidating, you should consider the pros and cons of Direct Loan consolidation. Please refer to Federal Loan Consolidation for additional information.

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