Big Update For Student Loan Forgiveness Buyback Program Coming After Months Of Uncertainty

A new program that offers borrowers an opportunity to “buy back” periods of time that didn’t count toward student loan forgiveness has been largely stalled for months. But a recent court filing suggests the Department of Education may begin processing these requests in the coming weeks, and borrowers may get some key details very soon.

PSLF Buyback allows borrowers on track for Public Service Loan Forgiveness, a popular program for nonprofit and government workers that can wipe out their federal student loan debt, to get retroactive credit for certain nonpayment periods in exchange for a lump-sump payment. PSLF typically requires 120 qualifying payments – the equivalent of 10 years – while the borrower is employed in eligible full-time public service employment. But most periods of nonpayment associated with deferments and forbearances don’t count toward loan forgiveness under program rules. PSLF Buyback, created by the Biden administration in 2023, was intended to address a major problem with PSLF, which is that borrowers are sometimes put into a deferment or forbearance through no fault of their own, and then lose months or years of loan forgiveness credit.

PSLF Buyback applications have surged in recent months as borrowers impacted by the ongoing legal challenge over the SAVE plan have been thrown into an involuntary forbearance. Following an appeals court order that blocked the SAVE plan, the Department of Education had little choice but to place millions of SAVE plan borrowers into a forbearance to suspend their monthly payments and interest. However, the forced forbearance isn’t counting toward student loan forgiveness, including for PSLF. Many borrowers who would otherwise qualify for loan forgiveness have tried to utilize PSLF Buyback to get the SAVE plan forbearance period counted. But the Department of Education has not been processing many of those buyback requests, and many borrowers have been stuck in limbo since last summer.

Here’s where things stand, and what borrowers pursuing student loan forgiveness through PSLF Buyback should expect in the coming weeks.

How Student Loan Forgiveness Under PSLF Buyback Is Supposed To Work

PSLF Buyback was created as a “safe harbor” option for public service borrowers on track for student loan forgiveness who were thrown into a deferment or forbearance that didn’t count. But the program has strict eligibility rules.

“The buyback opportunity is only available to you if you already have 120 months of qualifying employment and buying back months in forbearance or deferment would result in forgiveness under PSLF,” says Department of Education guidance. That means you can’t apply for PSLF Buyback if you’re only a few years into what is essentially a 10-year student loan forgiveness program. Borrowers can request buyback only once they have the equivalent of 10 years of qualifying PSLF employment, and the bought back months – if approved – must allow the borrower to reach the threshold for loan forgiveness.

“We require 120 months of approved qualifying employment to ensure that buying months of deferment or forbearance results in you achieving forgiveness,” says the department. “This prevents borrowers from unnecessarily buying back months that are not eligible for PSLF credit.”

Importantly, not all periods are eligible for PSLF Buyback. In-school periods, grace periods, periods of default, and bankruptcy periods are all excluded. In addition, you can’t utilize PSLF Buyback for loans that have already been paid off or were subsequently consolidated, discharged, forgiven, or are ineligible for the PSLF program (such as FFEL-program loans).

For qualifying borrowers, normally the PSLF Buyback amount would be calculated by taking the normal monthly income-driven repayment plan amount that the borrower was paying just before the non-qualifying deferment and forbearance period began, and multiplying that by the number of months the borrower is trying to buy back. But for borrowers enrolled in the SAVE plan, that hasn’t been possible, because the appeals court’s injunction prevents the Department of Education from utilizing the SAVE plan repayment formula to calculate payments. This has contributed to the large and growing backlog of unprocessed PSLF Buyback applications.

Big Updates Coming For Student Loan Forgiveness Through PSLF Buyback

After a federal appeals court issued a new order in February further blocking the SAVE plan, the Department of Education responded by shutting down the entire income-driven repayment system, preventing borrowers who were stuck in the SAVE plan forbearance from applying to switch to a different IDR plan. This contributed to yet another surge of PSLF Buyback applications, as borrowers nearing their loan forgiveness threshold became more desperate to get the forbearance period counted, and PSLF Buyback was the only path once the IDR system was shut down.

In March, the American Federation of Teachers filed a lawsuit against the Trump administration over the IDR application shutdown. In response, the Department of Education reopened IDR applications and filed a sworn declaration that IDR processing would be resuming by early May. And then in April, the AFT and the department filed a joint status report whereby department officials agreed to provide regular updates to the court not only on IDR application processing, but also on PSLF Buyback.

Under the terms of this status agreement, by May 15th the Department of Education must provide to the court with “a list of forbearance types that are eligible for PSLF Buyback.” This is noteworthy, as the department’s PSLF Buyback website suggests that nearly any kind of forbearance can qualify for buyback, provided the forbearance period meets the program’s other eligibility restrictions. Importantly, the department’s guidance on the SAVE plan legal challenges indicates that the SAVE plan forbearance can be bought back through the PSLF Buyback program. But a declaration filed by a top department official in April suggests that only “periods of administrative and processing forbearance” are eligible for PSLF Buyback; this contradicts both the regulations governing the buyback program as well as other department guidance. Notably, under current rules, a processing forbearance and certain administrative forbearance can already count toward loan forgiveness for PSLF, without any need for the buyback program. Getting clarification on which forbearance categories are eligible for PSLF Buyback will be crucial for borrowers.

Also on May 15th, the Department of Education must provide to the court with “The number of Public Service Loan Forgiveness (PSLF) Buyback applications that were pending at the end of the preceding month,” as well as “The number of PSLF buyback applications that were decided (that is, for which the Department has completed its processing) during the preceding month.” This is critical, and allows the AFT – with court supervision – to monitor the department’s compliance and ensure that PSLF Buyback applications are actually getting processed. The department must then file a subsequent status report every 30 days thereafter.

How to Apply For Student Loan Forgiveness Through PSLF Buyback

Borrowers who meet the PSLF Buyback eligibility rules – in particular, those who have at least 120 months of certified, qualifying employment – should be sure to follow the detailed instructions on the Department of Education’ website to apply for student loan forgiveness through buyback.

After certifying their employment to ensure they have 120 months of confirmed qualifying PSLF employment, borrowers would submit their buyback request through the PSLF Reconsideration portal. They must include the following language in their request: ““I have at least 120 months of approved qualifying employment, and I am seeking PSLF or TEPSLF discharge through PSLF buyback. Please assess my eligibility for PSLF buyback.”

“Without the statement above, your PSLF Reconsideration submission will be considered an inquiry about buyback and not a request for a buyback assessment,” warns the department.

Borrowers in the SAVE plan forbearance who are hoping to get student loan forgiveness through PSLF Buyback should be aware that their buyback amount will probably not be calculated based on their SAVE plan payments. Because of the court injunction, the Department of Education cannot use the SAVE plan formula. Instead, the department may need to calculate a borrower’s buyback amount using a different IDR plan, such as IBR or PAYE, which may result in a higher-than-expected buyback amount if approved. Once approved, borrowers will receive written notice with their buyback amount, and they’ll then have 90 days to make the payment.