Deadline: What benefits are expiring on 12/31/2023?

This article was updated on 12/19/2023 as a result of the Department of Education’s (DOE) extension if the deadline from 12/31/2023 to 4/30/2024. References to the previous deadline have been changed to reflect the new deadline as a result of the DOE change that occurred on 12/18/2023.

April 30, 2024 is the new deadline to consolidate FFEL or Parent Plus loans into a Direct Consolidation loan to remain eligible for the IDR One Time Account Adjustment. The Department of Education (DOE) will continue to adjust student loan borrower repayment months upward all throughout 2024, but only for Direct loans or Direct Consolidation loans. Therefore, there is an urgency for borrowers with FFEL or Parent Plus loans to consolidate before April 30, 2024. This could make the difference between receiving total student loan forgiveness in the immediacy, or having this benefit delayed for years or decades.

On January 21, 2022, the U.S. Department of Education released a fact sheet called “Transforming Income -Driven Repayment“. This fact sheet, now commonly known as the predecessor to the “IDR One Time Account Adjustment” or OTA, was the first explanation of how the Department of Education will give borrowers credit for months in repayment under certain circumstances from 1994 to the present. Those circumstances revolve around some of the technical requirements to earn a month in repayment under the student loan laws that were passed by Congress. Due to the inadequacies of a broken student loan system and the misconduct of federally contracted student loan servicers, many borrowers who have held their student loans for decades ended up with relatively few months in repayment according to the DOE.

The number of months in repayment is the crucial factor that determines if a borrower can have their student loans forgiven under federal law. In the absence of a successful Total and Permanent Disability (TPD) claim or Borrower Defense to Repayment (BDR) claim, most borrowers will have to show 120, 240, or 300 months in repayment to have their loans forgiven. Denominated in years, these 10, 20, and 25 year timeframes are dependent upon the program that the borrower has selected to repay their loans.

Of the many different and ever changing rules of the IDR One Time Account Adjustment (OTA) since its inception, one rule in particular has a deadline of April 30, 2024. Although the DOE will continue to upwardly adjust the number of months that a student loan borrower has in repayment all throughout 2024, borrowers will need to consolidate any FFEL or Parent Plus loans into a Direct Consolidation Loan before April 30, 2024. Consolidation is a DOE process that can take several months, however if the application is submitted or postmarked by April 30, 2024 it will still be honored.

Although more than 13 years have passed since the federal government outlawed FFEL loan origination, there are still approximately 9 million student loan borrowers who still have outstanding FFEL loans totaling close to 9 billion dollars as of December 17th 2023. Part of the confusion may have to do with the fact that there are 2 different types of FFEL loans: “federally owned” and “commercially held”. Although there are minor distinctions between the ownership and insurance of two types, both are available to be consolidated by April 30, 2024 and therefore be eligible for the OTA. FFEL loans are not eligible for any of the 6 repayment plans that lead to forgiveness except for the Income-Based Repayment Program (IBR), which is a 25 year program. Parent Plus loans are not eligible for any of the income driven repayment plans, except for this brief period ending April 30, 2024. If the Parent Plus loans are consolidated, they will be eligible for one income driven program and also the OTA through 2024.

How can I tell if I have FFEL or Parent Plus loans?

If you took out federal student loans before October 1, 2010, there is a strong possibility that you have FFEL loans. If you took out loans or “cosigned” for loans so that your child or children could attend college, you most likely have Parent Plus loans. Sadly, many of the college financial aid offices across the U.S. practiced varying degrees of disclosure to students and parents of students regarding the nature of the loans that were being taken out. Combined with the length of time that has passed since the original transaction, it may be difficult for borrowers to determine the types of loans they hold.

If you are unsure whether or not you are affected by the April 30, 2024 deadline, feel free to give Hope Credit a call or submit a request for a free consultation on our website. We will be happy to let you know exactly which loans you hold, and whether or not you are affected by the April 30, 2024 deadline. In the event you are affected by the deadline, options are available to immediately put a plan in place to have your consolidation submitted or postmarked before 11:59 PM on April 30, 2024.

What does this mean for Hope Credit borrowers?

Since October of 2021, we have seen hundreds of Hope Credit clients have their loans forgiven under either the Public Service Loan Forgiveness (PSLF) Waiver or the IDR One Time Account Adjustment (OTA). Many of those clients have gone on to alert their friends, family, and co-workers of this extraordinary opportunity to increase net worth by reducing liabilities. Many of those who were referred have gone on to see their loans forgiven as well, creating a perpetual cycle of referral and forgiveness.

If you are a Hope Credit client and currently work a pubic service job, most of your co-workers qualify for PSLF. If you know anyone over the age of 45 who holds student loan debt, there is a strong possibility that eligibility for OTA forgiveness exists. There is no downside to finding out for sure.