PSLF Buyback Could Be an Option for Borrowers in the SAVE Plan Forbearance, But It’s Complicated

At least eight million borrowers have been forced into an administrative forbearance due to ongoing legal battles over the Saving on a Valuable Education (SAVE) plan. 

SAVE is a new income-driven repayment (IDR) plan that the Biden administration finalized and released last fall. The program offers lower payments, ends runaway interest accrual and opens pathways to student loan forgiveness. As with all IDR plans, payments under SAVE can also count toward Public Service Loan Forgiveness (PSLF), a popular program that allows borrowers to potentially qualify for forgiveness in as little as 10 years if they comply with all eligibility rules, including working in qualifying nonprofit or government employment. 

But the SAVE plan forbearance has impacted many borrowers on track for PSLF. Those who are in that forbearance will not have to make payments and won’t accrue interest, but the forbearance period doesn’t count toward student loan forgiveness under either IDR or PSLF. 

This essentially pauses loan forgiveness progress for millions, which is particularly concerning for PSLF borrowers who may be nearing the end of their 10-year service obligation. 

Workarounds for PSLF borrowers affected by SAVE plan forbearance

The Education Department has offered several possible workarounds for the SAVE plan forbearance, but they all have potential flaws. 

Switching to a different IDR plan

Borrowers can switch to a different IDR plan, but this would likely increase monthly payments for many. Furthermore, the department has taken down the online IDR application and has paused the processing of all IDR requests while it updates its internal systems to ensure they are complying with the recent court order. So, as a practical matter, this isn’t even a viable option in the near term.

Opting for the 10-year Standard Repayment Plan

Alternatively, borrowers can switch to a 10-year Standard plan, which qualifies for PSLF. But this may be prohibitively expensive for most borrowers, and the 10-year Standard plan is typically unavailable for larger Direct Consolidation Loans.

PSLF buyback: A promising, yet complex, alternative

A final workaround that could be more promising is the so-called PSLF buyback. This is a new option that the Biden administration rolled out last year as part of a broader package of regulatory updates for PSLF and other federal student loan forgiveness programs. Essentially, the buyback option allows PSLF borrowers to make a lump-sum payment covering prior periods that didn’t count toward PSLF— such as, for instance, the SAVE plan forbearance.

“Due to changes in PSLF regulation, you can now buy back certain months in your payment history to make them qualifying payments for PSLF,” says Education Department guidance. “Specifically, you can buy back months that don’t count as qualifying payments because you were in an ineligible deferment or forbearance status.” 

But the rules are complicated.

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Borrowers can’t request PSLF buyback until they’ve reached 120 months

The biggest impediment to applying for PSLF buyback is that borrowers can’t even request relief under the program until they have reached 120 months of qualifying PSLF employment. 

“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 or Temporary Expanded PSLF (TEPSLF),” says the guidance. 

This means that borrowers can’t preemptively request PSLF buyback in advance of a non-qualifying period. It also means they can’t request PSLF buyback if they haven’t worked in qualifying employment for at least 10 years. 

Finally, even if borrowers have been working in qualifying PSLF employment for at least 10 years, they still can’t request a buyback unless the missing months from the non-qualifying period would get them over the 120-qualifying-payment threshold, entitling them to loan forgiveness under PSLF if approved. 

Other key rules and restrictions governing PSLF buyback

The PSLF buyback program has several other rules and restrictions that could limit its applicability to specific borrowers. For example:

• Borrowers can’t request PSLF buyback for loan periods prior to their most recent Direct Loan consolidation. 
• Borrowers can’t request PSLF buyback if their loans have already been paid in full or discharged.
• Borrowers must have already certified 120 months of qualifying PSLF employment, even if all those months haven’t resulted in them being counted as qualifying payments.

How PSLF buyback amounts are calculated

For borrowers enrolled in an IDR plan such as SAVE, “If the deferment or forbearance was less than a year in length, we’ll use the lower of the two monthly IDR payments for the months before or after the time in deferment or forbearance” and multiply that by the number of months in the non-qualifying period to calculate the buyback amount, says the Education Department. 

So, as an example, let’s take a borrower who was on the SAVE plan and on track for PSLF. The borrower’s monthly payment under SAVE right before the forced SAVE plan forbearance was $400 per month, and they had 115 qualifying PSLF payments at that time. 

This borrower could, in theory, apply for a PSLF buyback after five months in the SAVE plan forbearance, provided they continue working in qualifying employment during that time. Their buyback amount would be $2,000 — $400 for each of the five months in the forbearance.

However, the ongoing litigation over the SAVE plan could complicate this payment calculation. If SAVE is still blocked at the time of the buyback request or gets struck down, it’s possible that the Education Department may have to calculate the buyback amount based on a different IDR plan. Since other IDR plans would be more expensive than SAVE for most borrowers, this could result in a higher-than-expected buyback amount. However, the department has not indicated how it will handle PSLF buyback requests under these circumstances.

How to apply for PSLF buyback

Borrowers who wish to pursue PSLF buyback should carefully review the Education Department's instructions, which are detailed on its dedicated website for the program. After submitting their PSLF employment certification and allowing for that to be processed, borrowers would submit a buyback request in an online submission via the PSLF Reconsideration portal. 

Borrowers must include specific 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.”

According to the Education Department, “If you are eligible to buy back months, we will send you a buyback agreement with the amount to pay and instructions to pay the full amount within 90 days of our email to you with the buyback agreement.”

Weighing the PSLF buyback as an option for affected borrowers

Millions of borrowers are contending with unprecedented chaos in the student loan system as a result of the legal challenges of the SAVE plan. And while PSLF itself is not being challenged in court, many PSLF borrowers have nevertheless been impacted by the fallout.

Is the PSLF buyback right for you?

For PSLF borrowers who are getting fairly close to their 120th month of qualifying employment and would otherwise soon qualify for student loan forgiveness, PSLF buyback may be worth considering. It is a new program with not much of a track record, and it clearly has several complicated eligibility rules and procedures. But it could be a viable workaround for those forced into an administrative forbearance that does not count toward PSLF.

However, borrowers who are further away from their loan forgiveness threshold for PSLF effectively have fewer options because it would likely be too early for them to apply for the PSLF buyback. These borrowers will have to hope that the SAVE plan dispute gets resolved soon. Otherwise, they may have to consider switching to a different — and potentially more expensive — repayment plan in order to continue progressing toward loan forgiveness under PSLF.