Reboot Your Life: Tampa Student Loan and Bankruptcy Attorney Blog
So the big news in the world of student loans is that the online system has once again been shut down for consolidations and IDR applications – as of Friday, Feb 21. This is likely due to the 8th Circuit expanding its stay to stop all forgiveness under PAYE and ICR. For now, someone’s best bet for forgiveness is to get onto IBR – Income Based Repayment. IBR was Congressionally passed in 2009 and does not appear to be going anywhere. It’s a 25 year program that allows for full forgiveness of any remaining balance once 25 years of IBR credits is obtained.
The 8th Circuit also halted the IDR Recount. While we don’t believe that any loans previously forgiven will be reinstated, we really don’t know what will happen to those pending loans benefitting from the IDR Recount – but still have months or years to go. The best we can say is to keep copies and screenshots of anything to do with the IDR Recount. You may need this one day.
So why is the consolidation button greyed out? Both FFEL loans and Direct Loans are eligible for IBR. So a consolidation isn’t necessary for IBR. If the government is discouraging Double Consolidation for Parent Plus loans, PAYE, ICR and the IDR Recount, there really isn’t a reason to consolidate older federal student loans under the FFEL system to the newer Direct loans. Also the government has to pay the private originators of a FFEL loan upon its consolidation to a Direct loan. It doesn’t want to do that.
Someone working public service needs to have Direct loans in order to qualify for Public Service Forgiveness. Probably most have already consolidated and now have Direct Consolidation loans however. Provided this was done before last summer, not only did the loans change to Direct, but someone was also able to retain their prior loan history of payments under FFEL and credit for extended forbearances under the IDR Recount. The final deadline for that was June 30, 2024 after being extended several times.
So is all consolidation dead? I haven’t heard that. Consolidation remains one of the two “get out of jail cards” to cure a loan default. So that’s a good reason to consolidate perhaps. A third way called the The Fresh Start initiative to easily cure defaults ended October 2, 2023. However, someone can still use a Chapter 13 bankruptcy to cure a 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” that if you need to consolidate for any reason, a paper application to Aidvantage may still be processed. It’s just not common knowledge.
