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How Student Loan Forgiveness Fixes will affect my income-based repayment?

College students in sunset Loan forgiveness

Student loans have always been a huge burden for many students and parents in the USA. Even though there are many repayment options available such as the income-based repayment plans (IBR), these are often not enough. However, the new changes announced by the Biden administration will help to provide some much-needed relief for those struggling with student loan repayments.

In this article, we will be digging deep into how these changes will affect your income-based repayment plan specifically. We will also look at other aspects of this new policy and how it might benefit you in the long term.

What is an Income-Based Repayment Plan?

Before we jump into the changes announced by the Biden administration, let's first take a quick refresher on what an income-based repayment plan is.

Income-based repayment plans are repayment plans that are based on your income and family size. These plans were created to help make repayments more affordable for those who are struggling to make their monthly payments. If you enroll in an income-based repayment plan, your monthly payments will be capped at a certain percentage of your income.

There are currently four different income-based repayment plans available:

1. Income-Based Repayment Plan (IBR): The monthly payments are capped at 10% of your discretionary income.

2. Income-Contingent Repayment Plan (ICR): The monthly payments are capped at 20% of your discretionary income.

3. Pay As You Earn Repayment Plan (PAYE): The monthly payments are capped at 10% of your discretionary income.

4. Revised Pay As You Earn Repayment Plan (REPAYE): The monthly payments are capped at 10% of your discretionary income.

The main difference between these plans is the percentage of your income that is used to calculate your monthly payment. However, all four plans have similar terms when it comes to repayment and forgiveness.

The changes announced by the Biden administration will mostly affect the IBR, PAYE, and REPAYE repayment plans.

Why are students struggling to make repayments?

Income-driven repayment (IDR) plans, Income-Based Repayment (IBR), and Revised Pay As You Earn (REPAYE) were created to offer borrowers affordable monthly payments depending on their income. The borrower might become eligible for student loan forgiveness after 20 or 25 years, depending on the plan.

For years, such programs as IDR, IBR, and REPAYE have struggled with issues. Millions of borrowers were improperly led into forbearance rather than an income-based repayment plan. Since these periods do not qualify toward the 20 or 25-year IDR payback period, they resulted in years and decades of progress being lost to student loan forgiveness.

According to the Department, at least 36 months of forbearance were used by more than 13% of all Direct Loan borrowers between July 2009 and March 2020. The maximum amount of forbearance that a borrower can take out against a particular loan.

These are some of the main reasons why students are struggling to make their repayments and why the new changes are so important.

What are the changes announced by the Biden administration?

On Tuesday, the Biden administration rolled out far-reaching changes to student loan forgiveness and income-based repayment programs. According to the Department of Education, over 3.6 million borrowers may benefit from the program, with at least 40,000 people receiving student loan forgiveness immediately. Here are some of the main changes that have been announced:

1. Thousands of borrowers will receive student loan forgiveness:

According to the Education Department, at least 40,000 students with a federal student loan will receive immediate student loan forgiveness under the new changes. Some students might get it through PSLF, and others under IDR programs, depending on their repayment terms. According to the Department, another 3.6 million borrowers will receive at least three additional years of credit toward IDR student loan forgiveness.

2. The Biden administration has said that they will count certain deferment and forbearance periods when figuring out how much student loan forgiveness a person is eligible for

One of the administration's major changes announced by the Biden administration is that they will allow the Department to make a one-time adjustment to certain deferrals and long-term forbearance periods toward loan forgiveness under both PSLF and IDR.

It means that if you have been in forbearance for any reason related to the coronavirus pandemic, your time in forbearance will now be counted towards the 20 or 25-year forgiveness period. This is a significant change that will help many borrowers who have been struggling to make their repayments.

3. The Biden administration will make changes to count more payments toward student loan forgiveness

The Education Department has also indicated that it will consider payments toward PSLF and IBR forgiveness programs made before the federal loan forgiveness program began. This has major consequences for borrowers, as consolidation typically "restarts the clock" on a debtor's IDR loan repayment period. As a result, it may be substantially more straightforward for hundreds of thousands of borrowers to get advanced quite closer to loan forgiveness.

The Department also said it would be replacing the IDR payment counting procedure. By the end of 2022, FSA will post a borrower's ongoing progress towards their IDR repayment term at The department added, "To assure reliable and consistent payment counting procedures, the Department of Education has directed FSA to provide new instructions to student loan servicer personnel. It will also maintain track of payments in its modernized data systems."

Who qualifies for the new scheme?

According to the Department of Education, at least 40,000 borrowers may qualify for near-immediate (or immediate) student loan forgiveness under this program. Any borrower with loans that have been in repayment for at least 20 or 25 years will qualify for automatic forgiveness, even if you are not presently on an IDR plan, according to the Department of Education's recent instructions.

This means that students who have made 240 (20 years x 12 months) or 300 (25 years x 12 months) student loan payments, regardless of the type of repayment plan they are on, will qualify for forgiveness. The Department has also said that if you have consolidation loans, your time in repayment before consolidation will be counted towards the 20 or 25-year total.


It is a historical decision made by the Biden administration to fix the income-based repayment system and offer immediate student loan forgiveness to thousands of borrowers. We hope this article helped you understand how these changes will affect your IDR plan.


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