Thousands of student-loan borrowers in public service are facing a harder road to debt relief
It’s getting harder for student-loan borrowers in public service to get relief.
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When the Department of Education eliminated the SAVE income-driven repayment plan, it also made a key change to the Public Service Loan Forgiveness process, which forgives student debt for government and nonprofit workers after 10 years of qualifying payments.
The change could increase payments substantially for thousands of borrowers.
Borrowers pursuing PSLF have the chance to “buy back” any months spent in deferment or forbearance, if those months would put them at the threshold for relief. For example, a borrower who made nine years of qualifying payments and spent one year in forbearance could pay off that one year amount and immediately qualify for loan forgiveness.
Previously, those repayment amounts were based on the SAVE formula, which allowed for lower monthly payments. The new guidance says that if borrowers are seeking to buy back months spent in deferment or forbearance on or after July 1, 2024, when litigation blocked the SAVE plan, their payments would be calculated using a different formula.
“If the borrower was not on the IBR, PAYE, or ICR Plan on either side of the period of time being bought back, then we will request income and family size information from the borrower to determine the appropriate buyback amount,” FSA’s guidance said, referring to existing income-driven repayment plans.
The change could affect thousands of PSLF borrowers. The latest status update filed by the Department of Education said that 88,170 PSLF buyback applications are pending as of February 28. The department received 4,180 buyback applications in February and processed buyback relief for 12,640.
Borrowers enrolled in SAVE will start getting notices to transition to a new repayment plan in July. Also beginning in July, the Trump administration’s new rule limiting eligibility for PSLF will go into effect. The rule redefines what “public service” means and would exclude employers who participate in “illegal activities,” which some lawmakers and advocates said would prevent relief for borrowers who work for companies that do not align with the administration’s political views.
It’s unclear how the rule will be implemented, and nonprofits have already filed lawsuits challenging it.
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