What is the one-time forgiveness count adjustment?
The one-time forgiveness count adjustment for federally-held student loans is a lesser-known, more confusing, yet more widely available special benefit announced in April 2022. Anyone with federally-held student loans is eligible to receive the adjustment. Essentially, the adjustment will count any repayment time, and certain deferment or forbearance time as forgiveness eligible, regardless of payments made, loan type, or repayment plan used.
Think about that for a moment. Those of you who have been in repayment for 10, 15, 20, or more years — regardless of the repayment plan you’ve used or the life events that have interrupted your well-intentioned repayment strategy — can have most (if not all) of that time credited as forgiveness-eligible. For most veterinarians who graduated before 2012, forgiveness requires 25 years of qualifying payments. This is a special opportunity to clean up all of the unfavorable mess that has been student loans for the last 30 years and be done with repayment sooner rather than later. In fact, many of our colleagues who have been in repayment for 25 years or more are seeing their loans forgiven right now under this special count adjustment! More than 800,000 borrowers have received forgiveness notices and had their balances canceled so far. Each month going forward, more borrowers who meet the repayment threshold will see their balances forgiven as well.
Student loan forgiveness time is very valuable. Even adding one more year of time towards forgiveness can save you tens of thousands of dollars of monthly payments. The more you reduce the required number of years you need to pay, the less you’ll pay in total and the sooner you’ll be done with repayment.
Separate from but related to the one-time count adjustment, is the decision whether or not to consolidate your loans. Many need to consolidate in order to receive the maximum count adjustment benefit. Let’s dive in to this a bit.
Since the recent Climbing Mt. Debt webinar on how to make sense of student loan changes and prepare for interest and payments, we’ve had hundreds of questions regarding the count adjustment. The most common are:
- How do I know if I’m eligible for the one-time forgiveness count adjustment?
- How do I know if I need to consolidate to receive the one-time count adjustment?
- How do I know how much time I will receive if/when I consolidate?
- Won’t consolidation reset my forgiveness progress?
- Which repayment plan should I choose if I do consolidate my loans?
Having coached hundreds if not thousands of our colleagues through these dilemmas over the last year and a half, let’s talk about how the VIN Foundation Student Debt Team approaches each of those commonly asked questions:
How do I know if I’m eligible for the one-time forgiveness count adjustment?
Anyone with federally-held student loans is eligible to receive the adjustment. Essentially, the adjustment will count any repayment time, and certain deferment or forbearance time as forgiveness eligible, regardless of payments made, loan type, or repayment plan used.
If your count adjustment puts you over the finish line (25 years of eligible time for most veterinarians) you will receive a cancellation notice. These notices have started going out already.
If you have not yet reached the required number of qualifying payments to receive a cancellation notice in 2023, you can expect to see your count adjustment in 2024.
How do I know if I need to consolidate to receive the one-time count adjustment?
First, let’s review those who do not need to consolidate. If you have loans only from veterinary school and they are all Direct loans, then there is no additional count for you to gain via consolidation UNLESS you are a new graduate and your loans are still in their grace period.
Now let’s explore who should consolidate.
In-school loan time is not forgiveness eligible. However, if you graduated in 2023 and your loans are still in their grace period (particularly those of you who just graduated from the inaugural University of Arizona veterinary class — congratulations!), then you may want to consolidate in order to get your forgiveness clock started. Grace period time is not forgiveness-eligible time, even under the count adjustment. The only way to end a grace period early is to consolidate and select the “do not delay processing” option.
If you have a portfolio of federal loans that includes Direct Loans and other loans: Federal Family Education Loans (FFELs), Health Professions Student Loans, Loans for Disadvantaged Students, or Perkins Loans; this is an excellent opportunity to consolidate those non-Direct Loans. Not only will this keep the forgiveness credit you have for your Direct Loans, but you could also add to your forgiveness count, particularly if you have older Direct or FFELs that have additional qualifying repayment time. Start your Direct Consolidation Loan before the end of this year to receive the maximum forgiveness count adjustment.
At this point, whenever we see a portfolio of loans that contains FFELs, we recommend consolidating ASAP. Some of you with older FFELs may even see your remaining balance forgiven after you consolidate.
If you paid older loans to zero during the pandemic forbearance period, you can request a refund of those COVID payments which will re-instate those loans, then consolidate all of your loans to receive a higher amount of forgiveness credit (if those older loans have been in repayment longer than your veterinary school loans). Crazy, right?
Unfortunately, if you have older loans that you have already paid off before the pandemic forbearance period, they will not be counted in the forgiveness count adjustment.
The most beneficial (or sometimes necessary) way to receive the maximum one-time forgiveness count adjustment is to consolidate all of your remaining loans into a Direct Consolidation loan. Why? If you have loans with different amounts of repayment time included in a consolidation loan, your consolidated loan will receive the maximum number of repayment years when the count is applied in 2024. However, you must consolidate before Dec 31, 2023, in order to receive the maximum possible count adjustment.
If your only remaining loans are already Direct Consolidated Loans, you don’t need to do anything more to receive the count adjustment. If you’re not sure, log in to studentaid.gov, grab a federal student aid data file, and upload it into the VIN Foundation My Student Loans tool.
In the My Student Loans summary, look at the Loan Types tab. You’ll see names for your various remaining loan types. In the My Student Loans example below, we see two different types of Direct Consolidated loans and one type that is not consolidated (Direct Stafford Unsubsidized).
The already consolidated loans will receive the maximum count adjustment based on the loans included in that consolidation. But there is also a potential opportunity to consolidate the remaining Direct Stafford Unsubsidized loan with the existing consolidated loans into a new Direct Consolidation Loan if it would increase the overall repayment time for the new consolidation loan.
If all of your loans are from veterinary school only and are all Direct Loans already, or if your remaining loans are only Direct Consolidated loans, you don’t need to do anything. You’ll receive the maximum count adjustment corresponding to when you started repayment after graduation. However, if you have multiple different loan types with potentially different amounts of repayment time, then you could benefit from a new Direct Consolidation Loan before the end of this year.
How do I know how much time I will receive when I consolidate?
This question is best answered with an example:
Let’s take a 2017 DVM who graduated with a mixture of Direct Loans, Health Professions Student Loans, and Perkins Loans. They completed their undergraduate degree in 2012, entered repayment on those loans, and then were admitted to veterinary school in 2013. They didn’t consolidate after graduating from veterinary school. They’ve had their Direct Loans in an income-driven plan for the last 6 years, and their HPSLs and Perkins have been in a fixed 10-year plan. If they consolidate ALL of their federal student loans into a Direct Consolidation loan before the end of this year, they will have one remaining Direct Consolidation Loan that has 7 years of qualifying repayment time: Six years for the years in repayment since graduating from veterinary school plus one year of credit for the year in repayment before entering veterinary school. They will also have a lower monthly student loan payment because all of their remaining consolidated balance will be covered by a single repayment plan.
Take that same example and increase the time between undergraduate and veterinary school. Maybe they experienced a career change and completed undergrad in 2005 and had FFELs in repayment for 8 years before starting veterinary school in 2013. Even if you’re consolidating a rather small amount that has an additional 8 years of repayment time, your entire new consolidation loan will receive that extra time as forgiveness time. In this case, you should have 14 years of qualifying forgiveness time when the count is applied in 2024: Six years for the years in repayment since graduating veterinary school plus eight years of credit for the years in repayment before entering veterinary school. The closer you get to forgiveness without having to make payments, the less you’re going to pay for your student loans and the sooner you will be done with student loan repayment.
The same is true for those with differing amounts of Public Service Loan Forgiveness (PSLF) time. Let’s say you have some loans with 90 months of qualifying PSLF time and others with 40. In this case, the 40 qualifying PSLF months overlap with some of the 90 months as the borrower took additional loans for a master’s degree later. If you consolidate all of these loans together before the end of the year and submit a new PSLF employment certification form (or forms) covering the 90 months of time you have, your entire new consolidation loan will receive the maximum PSLF credit of 90 months and on track to receive tax-free PSLF at 120 months.
Won’t consolidation reset my forgiveness progress?
It used to. And the consolidation application will still tell you that will happen. However, that is no longer the case. This is why it’s so important to stay informed on changes to student loan repayment. There are two major changes that have significantly changed how consolidation treats your loans: the limited one-time forgiveness count adjustment and the more permanent weighted average forgiveness change that took effect on July 1, 2023.
The limited-time forgiveness count adjustment will give you the maximum forgiveness count credit for the loan with the highest amount of forgiveness qualifying time included in the consolidation loan as long as you consolidate before the end of this year. After that, consolidating loans with differing amounts of forgiveness qualifying time will result in a weighted average forgiveness count for the new consolidation loan. It’s much more beneficial to receive the maximum count adjustment. However, the weighted average calculation will be helpful for those who are not able to consolidate under the limited time count adjustment — like veterinary students who are in school through the end of this year. Everyone else should be quickly assessing whether or not they can benefit from a Direct Consolidation Loan before the end of this year.
Which repayment plan should I choose if I do consolidate my loans?
For now, choose the plan that results in the lowest monthly payment. If that is an income-driven plan, great! If it’s maybe the standard plan, that’s fine for now. The key is to get your loans in a position to receive the maximum one-time count adjustment. Until the count is applied, any repayment time is considered forgiveness-eligible. However, once your count is applied, the normal forgiveness rules will apply, meaning you will need to use a forgiveness-eligible plan from that point forward if you have repayment time remaining until you reach forgiveness. Knowing your exact forgiveness count will help you determine which repayment plan type you should use going forward. It also gives you an opportunity to scrutinize your income when you file your taxes for 2023 to see how an income-driven repayment strategy, like SAVE, may work for you. For example, if you’re married, filing separately could be the difference between reaching forgiveness sooner and paying more for longer.
Use the VIN Foundation My Student Loans tool to see your income-driven repayment eligibility and the Student Loan Repayment Simulator to see what your range of monthly payments will be. The Simulator can also help you check your likelihood of reaching forgiveness depending on your years in repayment and forgiveness count adjustment. One of the major advantages of the VIN Foundation Student Loan Repayment Simulator is the ability to account for your current forgiveness time in your remaining repayment projection.
If your repayment projections suggest that it is likely you will reach forgiveness after your count is applied, then choose an income-driven plan like SAVE, the recently updated version of REPAYE. This applies even if your income is high and would result in payments that are equal to a fixed 10-year plan. If, by making minimum required payments, you’re likely to pay your loans to zero and not reach forgiveness, then you can choose a strategy that makes sense for you.
If you are already using an income-driven repayment plan because it results in the lowest monthly student loan payment for you, then apply for income-driven repayment again during consolidation. With recent changes to repayment, including SAVE, there are now more flexible and beneficial options for you to receive a lower monthly student loan payment. For income-driven plans, your payments depend on your taxable income, marital status, recent tax filing status, spouse’s income, spouse’s federal student debt, family size, and state of residence.
The one-time forgiveness count adjustment is covered in more detail in the recent Climbing Mt. Debt webinar. Review the recording if you were not able to attend the live session.
If you need student debt help, reach out to VIN and VIN Foundation. We have free online tools like the VIN Foundation Student Debt Center and special message board areas to help you make sense of your options. If you have questions on any of the available tools and options, reach out to studentdebt@vinfoundation.org.
Dr. Tony Bartels graduated in 2012 from the Colorado State University combined MBA/DVM program and is an employee of the Veterinary Information Network (VIN) and a VIN Foundation Board member. He and his wife have more than $400,000 in veterinary-school debt that they manage using federal income-driven repayment plans. By necessity (and now obsession), his professional activities include researching and speaking on veterinary-student debt, providing guidance to colleagues on loan-repayment strategies and contributing to VIN Foundation initiatives.
