Tampa Student Loan and Bankruptcy Lawyer Blog — February 25, 2020
The big news is that, as of Friday 21st February, the online system for consolidations and IDRs has been again shut down. This is probably due to the 8th Circuit extending its stay to stop any forgiveness under PAYE or ICR. The best way to get forgiveness for now is to enroll in IBR, Income Based Repayment. IBR was passed by Congress in 2009 and doesn’t seem to be going away. The 25-year program allows for the full forgiveness of any balance after 25 years of IBR credit is achieved. We don’t think that any of the loans that were previously forgiven will ever be reinstated. However, we are unsure what will happen with those pending loans that benefit from the IDR Countdown but still have a few months or years left. We can only recommend that you keep screenshots and copies of everything related to the IDR Recount. Why is the consolidation button grayed out? Both FFEL and Direct Loans qualify for IBR. Consolidation is not required for IBR. If the government discourages Double Consolidation of Parent Plus Loans, PAYE and ICR, there is no reason to consolidate older federal loans under the FFEL System to the newer Direct Loans. The government must also pay the private originators when a FFEL is converted to a Direct Loan. It doesn’t wish to do that.
A person working in the public service must have Direct Loans to qualify for Public Service Forgiveness. Most likely, most people have already consolidated their loans and now have Direct Consolidation Loans. If this was done prior to last summer, the loans were changed to Direct and someone could also retain their previous loan history, including extended forbearances, under the IDR Recount, as well as their payment history under FFEL. The final deadline was June 30, 2024, after being extended multiple times. I haven’t heard of that. Consolidation is still one of two “get-out-of jail cards” for a loan default. This is a good enough reason to consolidate. The Fresh Start initiative, a third way to cure defaults easily, ended on October 2, 2023. A Chapter 13 bankruptcy can still be used to cure a student loan default. With all the consumer debt out there, that may become the solution if someone needs to cure a student loan default.
Bottom line, if you want to get on an IBR for ultimate forgiveness (which we are suggesting to many), you can still send a paper application to your loan servicer. We “think” a paper application may be processed if you want to consolidate your student loans for any reason. It’s not common knowledge.
