A recent shift in Department of Education policy is likely to raise the cost for some federal borrowers seeking relief through Public Service Loan Forgiveness. The change affects how the agency calculates “buyback” offers for months spent in forbearance or deferment, with immediate consequences for thousands waiting on decisions.
Public Service Loan Forgiveness, created by Congress and signed into law in 2007, cancels federal student debt for qualifying government or nonprofit employees after 120 qualifying payments — roughly a decade of payments. The Biden-era buyback option lets borrowers who met the employment requirement retroactively pay missed qualifying months to reach that 120-month threshold.
What changed and who it affects
The Education Department now says it will not use the payment formula tied to the SAVE repayment plan when calculating buyback offers if a borrower’s deferment or forbearance occurred on or after July 1, 2024. That decision follows legal challenges that paused the SAVE plan earlier this year — a federal appeals court blocked the program in March — and it alters the math for many applicants.
Under the SAVE model, monthly payments could fall to as little as 5 percent of a borrower’s discretionary income. By contrast, standard Income-Based Repayment approaches generally set payments at about 10 percent of discretionary income, and some older-loan cohorts can see effective shares near 15 percent.
The practical effect: borrowers whose missed months are priced using a higher-percentage formula will see larger buyback bills. For some, that difference pushes the option out of reach or forces them to tap savings or borrow from family to cover the required lump sums.
Why this matters now
Many borrowers entered an administrative forbearance when SAVE was placed on hold, and progress toward PSLF depends on active qualifying payments. As of December, roughly 7.2 million people remained enrolled under the SAVE framework, according to agency data, and the backlog of buyback requests has grown: more than 88,000 borrowers are currently waiting on a department decision.
That bottleneck means the timing of the department’s calculation rule can be decisive. If your missed months fall on or after July 1, 2024, the department’s new approach may raise the cost of converting those months into qualifying payments.
What borrowers should consider doing
Experts say it can still make sense to apply for buyback relief, even if the offer looks expensive. Filing preserves the option and triggers a formal offer that you can evaluate. At the same time, borrowers should take several practical steps immediately.
- Request buyback relief if you haven’t already — having an active application creates a record and will produce an official offer to compare.
- Carefully compare the monthly payment amount the department calculates for the buyback against what you would pay under the most affordable qualifying plan going forward, such as Income-Based Repayment or, beginning in July, the Repayment Assistance Plan.
- Remember that a buyback payment may be lower if your income during the deferment or forbearance was lower than your current income — but a large lump-sum remain a barrier.
- If ongoing monthly payments under a qualifying plan cost less than the buyback offer, consider resuming payments immediately to accumulate toward the required 120 payments for PSLF.
- Seek free counseling from nonprofit student loan advocates or state higher-education agencies before accepting an offer; they can help model scenarios and spot errors in the department’s calculations.
How to weigh the numbers
When your offer arrives, the key comparison is simple: will buying back missed months today get you to forgiveness sooner or cheaper than paying monthly on an affordable repayment plan? For some borrowers, paying a higher buyback amount may be worth it to reach PSLF quickly. For others, continuing with low monthly payments — even if it takes longer — will be the more sustainable choice.
Mark Kantrowitz, a higher-education analyst, notes that the backlog will slow processing times, so expect delays. Consumer advocates warn that using a non-SAVE formula for post-July deferments could significantly increase individual bills and dissuade people from exercising buyback options.
Quick checklist before you decide
- Confirm the dates of your deferment or forbearance and how they fall relative to July 1, 2024.
- Wait for the department’s formal offer; don’t accept or decline based on estimates alone.
- Run a side-by-side projection: buyback lump sum (or monthly equivalent) versus monthly payments under the lowest-cost qualifying plan.
- Contact your loan servicer and a nonprofit counselor if the offer seems erroneous or unaffordable.
This policy shift is a reminder that small changes in administrative rules can have outsized financial effects for borrowers close to forgiveness. Acting sooner — filing for buyback, documenting qualifying employment, and comparing realistic payment scenarios — gives borrowers options rather than leaving them at the mercy of a growing backlog and evolving agency rules.
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Jordan Keller specializes in analyzing the US financial markets. With concrete recommendations, he helps you secure and boost your investments by providing strategies that adapt to market fluctuations.