Deadline extended for federal student loan consolidation

May 15 (UPI) -- Americans making federal student loan payments have through June 30 to apply for loan consolidation to obtain a beneficial payment count adjustment.

Student loan borrowers who have direct loans or loans through the Federal Family Education Loan program and held by the Department of Education will see a "full and accurate" accounting of their progress toward loan forgiveness starting in September, the U.S. Department of Education announced Wednesday.

"The department is working swiftly to ensure borrowers get credit for every month they've rightfully earned toward forgiveness," Under Secretary of Education James Kvaal said in a press release.

"FFEL borrowers should consolidate as soon as possible in order to receive this benefit that already has provided forgiveness to nearly 1 million borrowers," Kvaal said.

The accounting will help borrowers know when they qualify for student loan forgiveness instead of paying in perpetuity. Any amounts forgiven will be reported to the IRS as income and are subject to federal income tax.

Borrowers with non-federally held FFEL loans can apply for debt consolidation by June 30 and still benefit from a payment count adjustment. The prior deadline was April 30.

Education Department officials in April 2022 initially announced the pending payment account adjustment after learning many student loan borrowers don't have a full accounting of their remaining time to make payments before qualifying for debt relief.

The Education Department also said many student loan servicers did not follow federal regulations and contracts regarding forbearances, which caused many student loan borrowers to spend an excessive amount of time in forbearance.

Such loan forbearances convert unpaid interest into principal during the forbearances, which leads to runaway interest and accelerated debt amounts well beyond the original amounts borrowed.

Student loan borrowers who are unsure about their qualification for consolidation can log in to StudentAid.gov and click on the "Loan Breakdown" link to view a list of their loans.

Loans are listed as "direct," "FFEL" or "Perkins" for those with Perkins loan balances.