Now that involuntary collections of defaulted student loans have resumed, people are wondering what their options are, with many looking into forgiveness. A new program involving “buy-backs” was created two years ago to help make that possible for some borrowers, but it has been stalled for months. Now, however, there are reports that the requests for that program could start to move forward, providing financial relief. Keep reading to learn more about the PSLF Buyback program for student loan borrowers, when it’s worth using and how to request it.
What is the PSLF student loan Buyback program?
The buyback program, also known as Public Service Loan Forgiveness (PSLF) Buyback, was created by the Biden Administration in 2023. It was developed to address the fact that those eligible for forgiveness were often losing months or years of forgiveness credit—often due to outside decisions.
“With COVID, forbearances, and administrative changes in rules and processing, there have been many periods of forbearance that weren’t requested by the borrower,” explains Jack Wang, host of the Smart College Buyer podcast. “And payments made during forbearance periods are not counted for PSLF.”
Forbearance means there is a temporary pause or reduction in student loan payments for a set period. Usually, it’s due to financial hardship involving the borrower, but administrative policies have also led to a pause in payments over the years.
The buyback opportunity, however, makes it possible to override that forbearance. “You can now buy back certain months in your payment history to make them qualifying payments for PSLF,” explains the Federal Student Aid website. “Specifically, you can buy back months that don’t count as qualifying payments because you were in an ineligible deferment or forbearance status.”
Essentially, you’re making up for time lost!
Who is eligible for student loan buybacks?
The buyback program was created for those who could receive PSLF. It’s limited to public service workers and allows those in the public sector to have the remaining balance of their loans forgiven after 10 years of service and making minimum payments.
Beyond that, there are other criteria you must meet to be able to buy back months:
- You still have a balance left on your loan(s)
- Your employment for those months is considered to be qualified
- Buying back the months will allow you to complete the required 120 payments for forgiveness
On the other hand, you cannot buy back months on some loans. These include loans:
- In a forgiven status
- In a discharged status
- That are included in a Direct Consolidation Loan
- Already paid in full
- That are not a Direct loan
Months during which your loan was in a default status, bankrupt status, or in-grace status are also examples of ineligibility.
What to consider about using the Buyback Program
If you’re eligible for PSLF, you may be wondering if it’s worth taking advantage of the opportunity. The first question to ask yourself is what money you have available to use.
“As much as people want to be out of debt, if using the buyback causes other financial hardship, such as having to borrow money for the buyback, that may not be a good deal,” says Wang. “In these cases, the borrower may be better off just making payments until they hit the qualifying number.”
Buying back months involves making an extra payment that’s at least the minimum that would have been required of you under an income-driven repayment plan during that month(s). This amount is calculated based on your income and family size when your loan was in deferment or forbearance.
If you do opt for buybacks to make your loan eligible for forgiveness, Wang advises having a plan for that extra money you’ll get back after no longer needing to make payments.
“If the goal is to save, or save more, once the loan is forgiven, the person needs to make the savings ‘real’ by setting up an automatic transfer or similar,” he adds. “Otherwise, the extra money just disappears into day-to-day expenses.”
How to apply for the PSLF Buyback Program
When you’ve decided that the buyback program is a good fit and that you’re eligible, the next step is to submit a request through PSLF Reconsideration. You’ll want to include the following statement in your 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.”
This ensures the department knows you want to be considered for an assessment and not just receive information.
If you’re eligible, you will then receive a buyback agreement, payment amount and deadline. (Note: More details on this may be further clarified now that the Department of Education is reportedly making plans to finally begin processing requests.)
Since it’s hard to say what things may look like for student borrowers moving forward, anyone who can and wants to utilize the opportunity should do so as soon as possible.
“If the buyback program is a viable option, I always encourage those to take advantage if they can,” advises Wang. “And do it quickly as there’s no guarantee that the buyback program will continue into the future!”
For more information on the program, visit the website.