IDR Account Adjustment: Credited Time, Thresholds, and PSLF

The income-driven repayment account adjustment was a one-time federal review that recounted every borrower’s months in repayment under looser rules than servicers had previously applied. The Department of Education finished the review in the fall of 2024 and began showing updated payment counts in January 2025. Borrowers whose adjusted count reached 20 or 25 years had their remaining balances forgiven automatically. Everyone else moved closer to that threshold, and any forgiveness that lands in 2026 or later now carries federal tax consequences the earlier waves did not.

Which Loans Were Included

Direct Loans held by the Department of Education qualified automatically. That covers Direct Subsidized and Unsubsidized loans, Grad PLUS, and Parent PLUS. Federal Family Education Loan Program debt and Perkins loans qualified only if the Department held them directly, not a commercial lender or a school.¹

Commercially held FFEL loans, school-held Perkins loans, and Health Education Assistance Loans were not eligible unless the borrower consolidated them into a Direct Consolidation Loan by June 30, 2024. That window has closed. Applications submitted on or before that date qualified if the new loan was disbursed before October 1, 2024.¹

One deadline is still open. Borrowers with joint consolidation loans could not separate and reconsolidate in time for the main review. They must submit a joint consolidation loan separation application by June 30, 2025, to have the payment count adjustment applied to their new individual loans later.¹

What Time Got Credited

The adjustment credited qualifying time between July 1, 1994, and the date it was applied to your account in 2023 or 2024. The rules were far more generous than the standard IDR counting rules servicers had used before.¹

Any month spent in a repayment status counted, no matter which plan you were on, how much you paid, or whether you were on IDR at all. Partial payments counted. Late payments counted. For years, servicers had only tracked months on IDR plans and ignored time on standard, graduated, or extended repayment. The adjustment swept those months in.²

Deferments were treated by date. Before January 2013, every deferment type except in-school deferment got credit. From January 2013 onward, only economic hardship and military-related deferments qualified.¹

Forbearance counted when a servicer had placed you in 12 or more consecutive months, or when you had accumulated 36 or more months in total. The rule was designed to address widespread servicer steering into forbearance instead of income-driven enrollment.²

For consolidated loans, repayment months on the underlying loans before consolidation now carry forward to the new balance. That reversed the old rule under which consolidation reset the clock to zero.²

What Still Did Not Count

Some periods people assume were credited were not. Time in default generally did not count. The exception was borrowers who exited default during the Fresh Start period; they received credit from March 2020 through the date they left default. After Fresh Start ended, only rehabilitation out of default carried a benefit under the adjustment.¹

Bankruptcy months were not credited. In-school deferments and in-school enrollment never counted, regardless of era. Grace periods were excluded, with a narrow exception where a prior servicer had reported a grace period longer than program rules allowed.¹

The 20-Year and 25-Year Thresholds

Whether the adjustment triggered forgiveness depended on your plan and when you first borrowed:

20 years for borrowers on Pay As You Earn, or on Income-Based Repayment if they first borrowed after July 1, 2014.
25 years for borrowers on Income-Based Repayment who first borrowed before July 1, 2014, and for borrowers on Income-Contingent Repayment.

Any borrower whose adjusted count reached the applicable threshold received automatic forgiveness, even if the loans were not on an IDR plan when the review was applied.³

How to Check Your Count and Fix Errors

Log into studentaid.gov and open your Aid Summary to review your loan status history. The Department has said it plans to show IDR-specific payment counts on the site so borrowers can track ongoing progress. If you are pursuing PSLF, the PSLF Help Tool lets you certify employment and track qualifying payments separately.¹

If the history looks wrong, contact your servicer first. For loans that were rolled into a consolidation, you may need to ask the holder of the original loan for a copy of your loan status history and then send it to your current servicer for additional processing. If the servicer does not resolve it, submit a complaint through the Federal Student Aid feedback center at studentaid.gov.¹

Borrowers whose forbearance periods fell below the 12-consecutive or 36-cumulative thresholds can still ask for an individual review through a complaint. The Department may credit additional months if the review finds a servicer steered you into unnecessary forbearance.

How This Interacted With PSLF

The same months credited under the adjustment also counted toward Public Service Loan Forgiveness, as long as you met the other PSLF requirements, most importantly employment with a qualifying public service employer during those months. PSLF requires 120 qualifying payments rather than the 20 or 25 years used for IDR.

The periods that counted toward PSLF mirror those for IDR: months in any repayment status, qualifying forbearance, pre-consolidation repayment time, and the same deferment rules. In-school deferments, grace periods, default, and months subject to a court judgment did not count toward PSLF either.

Unlike the earlier limited PSLF waiver, which expired on October 31, 2022, the account adjustment set no deadline for public workers to certify employment. You can still submit employer certification forms to have qualifying months applied toward the 120-payment threshold.

Taxes on Forgiveness in 2026 and Later

The American Rescue Plan Act excluded most student loan forgiveness from federal taxable income for discharges between January 1, 2021, and December 31, 2025. That exemption has expired. Balances forgiven on or after January 1, 2026, may be treated as cancellation of debt income on your federal return.⁴

If you reach a 20- or 25-year threshold in 2026 or later and $40,000 is forgiven, that amount could be added to your taxable income for the year. You would report it as ordinary income, typically after receiving a Form 1099-C from the servicer showing the canceled amount.⁵

Two exceptions matter. PSLF forgiveness remains permanently excluded from federal taxable income, so borrowers who reach 120 qualifying payments through public service owe no federal tax on the discharge. And borrowers who are insolvent when the debt is canceled, meaning total debts exceed the fair market value of assets, can exclude some or all of the canceled amount under the general insolvency exception. The excluded amount cannot exceed the degree of insolvency, and claiming it requires filing Form 982 with your return.⁶

State treatment varies. Some states do not follow the federal definition of taxable income and may tax forgiven balances even during periods when federal law excludes them. Check your state’s rules or ask a tax professional.

Consolidation Now Uses a Weighted Average

Under the adjustment, a consolidated loan inherited the payment count of whichever underlying loan had the highest qualifying time. That rule ended with the review. Since July 2024, consolidating loans with different counts produces a weighted average based on each loan’s balance and count. Consolidate a loan with 100 qualifying payments alongside a loan with 10, and the new balance does not carry 100; it falls somewhere between, weighted by dollar amount.

If you are still weighing consolidation, that math matters. Combining loans with very different histories can dilute the count on your most advanced loan. In some cases, keeping loans separate and letting each reach its own threshold independently is the better path.

1
Federal Student Aid. Payment Count Adjustments Toward Income-Driven Repayment and Public Service Loan Forgiveness
2
Consumer Financial Protection Bureau. Student Loan Forgiveness
3
Federal Student Aid. Income-Driven Repayment Plans
4
Taxpayer Advocate Service. What to Know about Student Loan Forgiveness and Your Taxes
5
Internal Revenue Service. Topic No. 431, Canceled Debt – Is It Taxable or Not?
6
Office of the Law Revision Counsel. 26 USC 108 – Income From Discharge of Indebtedness