PSLF Buyback Update Raises Concerns About Loan Forgiveness Processing

The Education Department released a major update this week on application processing for the PSLF Buyback program. And the data raises serious concerns about the ability of the department to work through a large and growing backlog of student loan forgiveness requests.

PSLF Buyback is a fairly new program established under the Biden-Harris administration that allows borrowers pursuing Public Service Loan Forgiveness (PSLF) to apply to make a lump sum payment to cover certain prior periods of deferment and forbearance that otherwise wouldn’t have counted toward loan forgiveness. Many borrowers stuck in the Saving on a Valuable Education (SAVE) plan administrative forbearance associated with a legal challenge, and who are nearing the 120-qualifying payments threshold for loan forgiveness under PSLF, have been applying for relief through PSLF buyback. The SAVE plan forbearance period doesn’t otherwise count toward loan forgiveness under IDR plans or PSLF. 

But the PSLF Buyback program has been plagued by a significant application backlog. And this week’s update by the Education Department illustrates that the problem continues to worsen. Here’s a breakdown.

PSLF Buyback offers path to student loan forgiveness

PSLF Buyback gives borrowers pursuing PSLF a path to get certain past periods of non-payment due to deferments and forbearances to count. PSLF usually requires 120 “qualifying payments” (which typically are payments made on Direct federal student loans under a 10-year Standard plan or an income-driven repayment plan, while the borrower works in eligible nonprofit or public sector employment). Most deferment and forbearance periods don’t count toward PSLF. The buyback program was intended to give borrowers the opportunity to retroactively get credit for these non-qualifying deferment and forbearance periods by making a lump sum payment.

“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 buyback program has specific eligibility criteria. 

“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),” explains the department. In addition, not all past periods of deferment and forbearance are eligible for PSLF Buyback.

“You can’t buy back months during which your loan was in any of the following statuses: In-school or In-origination, In-grace, Default, Bankruptcy, [or] Total and permanent disability monitoring,” says the department. “You can’t buy back any months on loans that are: not a Direct loan, in a paid-in-full status, in a forgiven status, in a discharged status, or included in a Direct Consolidation Loan.”

The buyback amount would typically be calculated based on what the borrower’s monthly payments on their student loans would have been based on their income during the period that is being bought back.

“Your payment amount will be based on the lowest IDR amount you were eligible for at the time of the deferment or forbearance,” says the department. “If the 10-year standard payment is lower than your calculated IDR payment, then the 10-year Standard payment amount will be used.” 

However, it is unclear if the department is able to use the SAVE plan formula for calculating a borrower’s buyback amount, given that the program is blocked and getting eliminated. 

Growing application backlog for PSLF buyback delays student loan forgiveness

On Monday, the Education Department published updated data on the PSLF Buyback application backlog for the first time in several months. Under an interim agreement with the American Federation of Teachers (AFT) to pause a legal challenge over allegations that the department was unlawfully blocking student loan forgiveness under IDR plans and PSLF, the department is required to post monthly status reports on processing progress. The latest status report reflects that the PSLF Buyback application backlog continues to grow.

During the month of November, the Education Department received 3,960 new PSLF Buyback applications, but only processed 2,960 requests. The department did not make clear how many of those requests were approved or denied, although 280 borrowers received student loan forgiveness under PSLF more broadly. Since borrowers have 90 days to make the payment required for PSLF Buyback once they are approved, the processing figures do not necessarily reflect all upcoming discharges.

The backlog of PSLF Buyback applications grew to 80,210 during the month of November

However, the backlog of PSLF Buyback applications grew to 80,210 during the month of November. That is an increase of more than 6,000 applications since the department’s last status update in September. And the backlog has nearly doubled since April, when it stood at just over 49,000 applications. At this rate, the backlog could exceed 100,000 applications well before the end of next year.

Many borrowers have been waiting months for a response from the Education Department on their PSLF Buyback application. In some cases, they have been waiting for more than a year. 

Other options for student loan borrowers pursuing PSLF

Given the large and growing application backlog for PSLF Buyback, borrowers who are near the 120-payment threshold for PSLF but remain stuck in the SAVE plan forbearance may want to consider switching to a different repayment plan that qualifies for PSLF, in addition to applying for PSLF Buyback. That way, they have two potential pathways to relief. Other qualifying repayment plans for PSLF include alternative IDR options such as ICR, IBR and PAYE, as well as the 10-year Standard repayment plan. 

Borrowers should be aware that their monthly payments may be significantly higher under these plans than they were under the SAVE plan. But it may be worth it if it means reaching eligibility for student loan forgiveness under PSLF.

“Borrowers can apply to enroll in a different PSLF-eligible repayment plan,” says online Education Department guidance. “We encourage borrowers to look at the specific terms of each plan to make the best choice for their individual situation. Different IDR plans may require different monthly payments, and—in the case of the IBR Plan—borrowers who later enroll in a different repayment plan may face interest capitalization (where unpaid interest is added to the principal balance). However, payments made under these IDR plans will count toward forgiveness under IDR and PSLF.”

Borrowers should be aware that they may not be able to remain in the SAVE plan forbearance for much longer, anyway. The Education Department entered into a settlement agreement last month to resolve the legal challenge that triggered the SAVE plan forbearance; as part of that agreement, the department will be ending the SAVE plan. 

While no formal timeline has been announced, SAVE plan borrowers are likely to be forced to change to another repayment plan sometime in 2026. Those who are nearing the threshold for student loan forgiveness under PSLF may want to consider their options now, before the department forces their hand.