One Mistake Could Erase Student Loan Forgiveness Progress Overnight

Forbes

21-04-2025

Thinking about student loan consolidation? For income-driven repayment and public service loan ... More forgiveness borrowers, the wrong move could disqualify you from student loan forgiveness.
If you're racing toward student loan forgiveness, whether through Public Service Loan Forgiveness or an Income-Driven Repayment plan, one false move could wipe out years of progress: consolidating your federal loans at the wrong time. Loan consolidation can be a valuable tool in some cases, but in 2025, it comes with unique risks. Thanks to legal upheavals in the student loan system, federal borrowers who consolidate now may see their qualifying payment counts reset to zero, erasing the credit they've earned toward loan cancellation. In today's uncertain environment, marked by a court injunction against the SAVE repayment plan and other litigation that has paused key borrower protections, this is arguably the worst time to consolidate your loans.
Under standard rules, consolidating federal loans means starting over on the path to student loan forgiveness. A Direct Consolidation Loan is treated as a brand-new loan, so any prior payments you made under PSLF or IDR no longer count toward the required threshold. The Department of Education has explicitly warned borrowers of this effect as the NSDFC notes: "Borrowers who consolidate will have their PSLF counts temporarily reset to zero." In the context of IDR plans, consolidation restarts the clock toward the 20 or 25 years of payments needed for forgiveness.
Until recently, this hard reset was softened by a special one-time account adjustment that the Department of Education was implementing: borrowers who consolidated by specific deadlines could retain credit for past repayment time (including time on older FFEL loans or periods of long forbearance) toward IDR and PSLF. However, that one-time IDR count adjustment program officially ended in January 2025. If you missed the deadline, consolidating now will likely cost you all those prior months or years of progress.
Consolidating mid-stream can wipe the slate clean for both IDR- and PSLF-driven student loan forgiveness:
Public Service Loan Forgiveness: Only payments made on Direct Loans count toward PSLF. If you previously had FFEL or Perkins loans, you'd need to consolidate into a Direct Loan to qualify, but doing so ordinarily meant losing any PSLF credits earned. Today, unless you have consolidated by the waiver deadlines, any PSLF credits you built up on Direct Loans will be lost upon a new consolidation. The Department of Education's guidance notes that if you consolidate loans after September 1, 2024, past qualifying payments on those loans will not automatically transfer. Your count may revert to zero in many cases​. This means a teacher or nurse who made 5 or 6 years of qualifying payments could see their 120-payment countdown start over from scratch by consolidating.
Income-Driven Repayment Forgiveness: All IDR plans promise loan forgiveness after a set repayment period, but the clock counting those years can be reset if you combine loans. Years in repayment before consolidation wouldn't count toward the 20- or 25-year requirement unless applied via the [no longer available]
2025 may be especially problematic to consolidate for borrowers aiming for student loan forgiveness. Due to ongoing legal battles over the SAVE plan and other borrower protections, the student loan landscape is in flux. The SAVE plan was supposed to offer lower payments and faster forgiveness for millions. But in late 2024, a federal court blocked the SAVE plan, questioning the administration's authority to implement certain forgiveness provisions. In February 2025, the 8th Circuit Court of Appeals imposed an injunction halting SAVE and even pausing aspects of its predecessor, the REPAYE plan​. This injunction has thrown many borrowers' repayment strategies into chaos.
For months, the Education Department responded by freezing critical programs. In February 2025, the department abruptly closed its online applications for all IDR plans and Direct loan consolidations​. Borrowers could not switch repayment plans or consolidate loans online for about a month. As Persis Yu, Deputy Executive Director of the Student Borrower Protection Center, said during an interview, "This has thrown the entire system into chaos... it is not entirely clear what it is going to mean for those borrowers"​.
While the IDR application (and consolidation request) was eventually put back online by late March 2025 after advocacy and a lawsuit from the American Federation of Teachers​, grave uncertainty remains. Notably, the forgiveness components of most IDR plans are still paused due to the court order​. This means that even if you reach the finish line for forgiveness, the Department of Education might not process the discharge immediately (unless you switch to the older IBR plan created by Congress and not affected by the injunction​).
PSLF is also indirectly affected; borrowers who were enrolled in the SAVE plan found themselves in limbo for months. Around 8 million people on SAVE have effectively been in a forbearance status for eight months, during which their payments were paused.
In such a turbulent policy environment, consolidating carries extra risk because it's unclear how or if past credits will be handled going forward. With the one-time adjustment program over and with the SAVE plan tied up in court, there is ambiguity about whether any retroactive credit will apply if you consolidate now. The Education Department has encouraged some borrowers close to forgiveness to consider switching plans (for example, moving to IBR) to get their forgiveness​, but no such workaround exists for consolidation. If you consolidate in 2025, you are essentially betting that the legal situation will sort itself out favorably – a gamble that could cost you years of payments if it doesn't.
Consolidating federal student loans is a double-edged sword. In a stable policy environment, it can be a smart move for those who need it; however, in 2025's unstable landscape, it can be a costly mistake for many borrowers, resetting the progress that would have led to student loan forgiveness. Until the legal dust settles and until we know the fate of the SAVE plan and related forgiveness provisions, it's wise to hold off on optional consolidations. Protect the progress you've made. In this season of uncertainty, the best course for many borrowers is to stay put, keep making qualifying payments, and remain vigilant for policy updates. Don't let a well-intentioned consolidation today erase your hard-earned path to a debt-free tomorrow.