Student Loan Forgiveness Approval Emails Sent To Thousands

The Biden administration is sending emails to hundreds of thousands of borrowers, notifying them that they have been approved for student loan forgiveness.

The notifications followed an announcement on Friday that the Education Department had approved $39 billion in new student loan forgiveness for over 800,000 borrowers. The department indicated that borrowers would start receiving emails notifying them of their approval for loan forgiveness in subsequent days.

Here are the latest details.

Student Loan Forgiveness Approved For Thousands Under One-Time Adjustment

The 800,000 borrowers receiving student loan forgiveness approval emails represent just the first wave of recipients under the IDR Account Adjustment. The program, first unveiled last year, is designed to remedy historic problems with Income-Driven Repayment plans. IDR plans are supposed to result in eventual loan forgiveness for borrowers after 20 or 25 years in repayment — and sooner than that for borrowers working toward Public Service Loan Forgiveness. But administrative problems and oversight issues resulted in many borrowers getting derailed.

Under the IDR Account Adjustment, the Biden administration will credit borrowers with past loan periods that previously could not be counted toward a borrower’s IDR loan forgiveness term. Any past period of repayment on nearly any kind of federal student loan can count as far back as July 1994. And most past periods of deferment, as well as earlier extended forbearance periods, can count, as well. Even recent periods of default can potentially be credited, provided borrowers get out of default by the end of the year.

“At the start of this Administration, millions of borrowers had earned loan forgiveness but never received it. That’s unacceptable,” said Under Secretary of Education James Kvaal in a statement on Friday. “Today we are holding up the bargain we offered borrowers who have completed decades of repayment.”

Borrowers Receive Student Loan Forgiveness Approvals Via Email

Shortly after the Education Department’s announcement, thousands of borrowers began receiving emails notifying them that they have been approved for student loan forgiveness under the IDR Account Adjustment.

“On April 19, 2022, the Biden-Harris Administration announced several changes that will help borrowers get closer to or achieve forgiveness under income-driven repayment (IDR) regardless of whether or not you have ever participated in an IDR plan,” reads the standardized email. “With these changes, you are now eligible to have some or all of your student loans forgiven because you have reached the necessary 240- or 300-months’ of payments under IDR.”

The email goes on to explain that the department “will work with your servicer to process your IDR forgiveness over the next several months.” So while hundreds of thousands of borrowers have been approved for student loan forgiveness, balances will not be instantly discharged. But that should happen in the coming months.

Borrowers also have the option of opting out of IDR student loan forgiveness, but they have to notify their loan servicer by August 13, 2023. “Some reasons why you might want to consider opting out include concerns about a potential state tax liability,” says the department in its email. Student loan forgiveness can be a taxable event, although federal law temporarily exempts IDR loan forgiveness from taxation through the end of 2025. Many states will mirror the federal income tax treatment of student loan forgiveness, but not all. Borrowers should consult with a qualified tax advisor to evaluate any potential tax consequences.

Student Loan Forgiveness Just Getting Started Under IDR Account Adjustment

Student loan forgiveness under the IDR Account Adjustment is entirely separate from Biden’s one-time student debt relief that was struck down by the Supreme Court last month. That program would have cancelled up to $20,000 in federal student loan debt for qualifying borrowers. Student loan forgiveness under the IDR Account Adjustment, while covering a much narrower pool of eligible borrowers, has no cap.

The group of 800,000 people who are being notified that they qualify for loan forgiveness represents just the first batch of borrowers who have reached the 20 or 25-year milestone for student loan forgiveness with the IDR Account Adjustment credit. The adjustment initiative will be ongoing through next year, and more borrowers will be notified that they qualify in the coming months. Borrowers who receive IDR credit under the adjustment, but fall short of the threshold for immediate student loan forgiveness, can continue to repay their loans under an IDR plan to make ongoing progress toward eventual loan discharge.

The Education Department released detailed new guidance on the program in the spring. Borrowers are encouraged to review these details. While much of the IDR Account Adjustment’s benefits will be provided automatically, some borrowers may need to take certain steps, such as consolidating their loans, before the end of 2023.