Public Service Loan Forgiveness Buyback Program: How it Works

If you’ve been working in public service for at least 10 years and are pursuing Public Service Loan Forgiveness (PSLF), you may wonder if the new PSLF Buyback program can help you achieve forgiveness faster.

Launched in October 2023 as a “hold harmless” provision, this program lets eligible borrowers convert previously ineligible periods of deferment or forbearance into qualifying payment counts for PSLF.

So, how does the PSLF Buyback program work?

By “buying back” those periods, you can get PSLF credit for months when you weren’t making payments. Your buyback amount is calculated based on what your payment would have been under an Income-Driven Repayment plan.

Who is eligible for the PSLF Buyback program?

The Biden administration designed this program for the 550,000+ borrowers who have worked diligently in public service for at least a decade but have had setbacks due to technical issues with PSLF. But if you recently consolidated your loans, the buyback opportunity might not significantly accelerate your path to forgiveness.

In this guide, we’ll answer all your questions about the PSLF Buyback program, including:

• What are the eligibility requirements for the PSLF Buyback program?

• How do I apply for the PSLF Buyback program?

• How is the PSLF Buyback amount calculated?

• How does the PSLF Buyback program interact with other PSLF flexibilities, like the IDR Account Adjustment?

By the end of this article, you’ll understand how the PSLF Buyback program works and whether it’s the right choice for your student loan repayment strategy.

Related: PSLF Weighted Average Consolidation Rules

1. What If I Don’t Have 120 Months of Qualifying Employment for PSLF Buyback?

To be eligible for the PSLF buyback program, you must have completed 120 months of approved qualifying employment. If you haven’t met this requirement, you won’t be able to participate in the buyback program.

To continue making progress towards PSLF, make sure you:

1. Work for a qualifying employer

2. Make on-time payments

3. Certify your employment annually

Once you reach 120 months of qualifying employment, you can explore the buyback option to have more months counted towards forgiveness.

2. Can I Buy Back Months from Loans Included in My Consolidation Loan?

No, you cannot buy back months from loans included in your consolidation loan. You can only buy back months on your current consolidation loan. Months from the loans that were consolidated or periods before the first disbursement date of the consolidation loan are not eligible for buyback.

3. What Happens If I Can’t Pay the Amount in My PSLF Buyback Agreement Within 90 Days?

If you cannot pay the amount stated in your PSLF buyback agreement within 90 days, the agreement will be void. You’ll remain responsible for your regular monthly payments as per your billing statements.

If you decide to reapply for a buyback agreement later, you may need to resubmit any requested documentation.

To be eligible for the PSLF buyback program, you must meet these criteria:

1. Have at least 120 months of approved qualifying employment

2. Have an outstanding balance on your federal student loans, such as Direct Loans, PLUS loans, or Federal Family Education Loan (FFEL) program loans combined into a Direct Consolidation Loan

3. Have months in your payment history that don’t count as PSLF payments due to being in an ineligible deferment or forbearance status

Note: The buyback opportunity is only available if you already have 120 months of full-time qualifying employment, and buying back months will result in forgiveness under PSLF or Temporary Expanded PSLF (TEPSLF).

Additionally, not all types of loans are eligible for buyback. You cannot buy back months on loans that are:

• Not Direct Loans

• Paid in full

• Already forgiven or discharged

• Included in a Direct Consolidation Loan

If you’re unsure about your eligibility, contact your loan servicer for help.

If you have a combination of Direct Loans and FFEL loans, you may still be eligible for the PSLF Buyback program, but only for the Direct Loan part of your debt. FFEL loans do not qualify for PSLF unless they are consolidated into a Direct Consolidation Loan.

But, consolidating your loans can affect your eligibility for the buyback program. If you consolidate your Direct Loans with your FFEL loans, you cannot buy back any months before the consolidation date.

In this situation, you have two options:

1. Keep your Direct Loans and FFEL loans separate. You can pursue the buyback program for your Direct Loans only while continuing to make payments on your FFEL loans separately.

2. Consolidate your FFEL loans into a Direct Consolidation Loan to make them eligible for PSLF. But doing this will reset the clock on your PSLF progress for the consolidated loans, and you cannot buy back any months before the consolidation date.

If you’re ready to take advantage of the PSLF buyback program, follow these steps to buy back eligible months:

1. Certify Your Qualifying Employment

• Use the PSLF Help Tool on StudentAid.gov to submit a PSLF form for any unreported periods of qualifying employment.

• This step makes sure all your qualifying employment is on record.

• When submitting your PSLF form, you must provide proof of your qualifying employment, such as an employment certification form or other documentation as required by the U.S. Department of Education.

• The PSLF Buyback program allows you to retroactively buy back eligible months, making it possible to get credit for past periods of public service work.

2. Verify Your Eligibility

• Check the months you spent in deferment or forbearance you want to buy back.

• Confirm that you have approved qualifying employment for each month.

• This step helps you determine which months are eligible for buyback and makes sure buying back those months will count towards PSLF forgiveness.

• If you’re unsure about your eligibility for certain months or have questions about your IDR plan eligibility during the buyback period, contact the Education Department or your loan servicer for help.

3. Submit a PSLF Reconsideration Request

• Write a letter asking for a PSLF reconsideration for buyback. Include the following statement: “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.”

• Submit your request letter and any supporting documentation, such as proof of qualifying employment or income and family size information (if applicable).

• This step starts the buyback process and provides the information for the Department of Education to assess your eligibility.

• If you have multiple periods of deferment or forbearance you want to buy back, contact the Education Department for clarification on submitting buyback requests for multiple periods.

4. Review and Sign Your Buyback Agreement

• If you’re eligible for buyback, you’ll receive a buyback agreement via email within 30 days of submitting your request.

• The agreement will include the total buyback amount and payment instructions.

• Review the agreement carefully, and if you agree to the terms, sign and return the agreement as instructed.

• If you have concerns about the buyback amount or need clarification on the agreement, contact the Education Department for guidance.

5. Make Your Buyback Payment

• After signing and returning your buyback agreement, you’ll have 90 days to make the full buyback payment.

• Follow the payment instructions in your agreement and submit your payment before the 90-day deadline.

• Once your payment is received, the bought-back months will be counted toward your PSLF eligibility.

• If you cannot make the full payment within the 90-day period, contact the Education Department to discuss your options and potential next steps.

The average PSLF buyback timeline, from submitting the buyback request to loan discharge, is about 90 days, based on the data from borrowers in this Reddit Thread.

Keep in mind that individual experiences may vary, and the timeline can be affected by factors such as the volume of applications, the complexity of your case, and the responsiveness of your loan servicer.

Here’s a breakdown of the typical timeline for each step in the process:

• Submitting the PSLF reconsideration request: 1-2 weeks

• Receiving and reviewing the buyback agreement: 2-4 weeks

• Making the buyback payment: Varies based on your financial situation and the payment method chosen

• Processing the payment and updating your loan status: 4-6 weeks

• Receiving confirmation of loan discharge: 2-4 weeks

While the 90-day average provides a general idea of what to expect, stay proactive and in communication with your loan servicer throughout the process.

If you experience any delays or have concerns about the status of your buyback request, please reach out to your loan servicer or the Department of Education for guidance.

The buyback payment amount is based on what your monthly student loan payment would have been during the deferment or forbearance period under an income-driven repayment plan, such as Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), or Income-Contingent Repayment (ICR).

To determine your buyback amount, follow these steps:

1. Identify Your IDR Plan Status During the Buyback Period

• If you were on an IDR plan right before or after the buyback months, the lower of the two monthly IDR payments will be used for buyback months less than a year.

• If you were not on an IDR plan during the buyback period, proceed to step 2.

2. Provide Your Income and Family Size Information

• If you were not on an IDR plan, you’ll need to provide your tax information and family size for the buyback period.

• If the buyback months span multiple tax years, you’ll need to provide tax information for each year.

• If you weren’t required to file a tax return for the buyback period, you must submit a statement confirming this.

• To determine your family size for the buyback period, provide a statement to the Education Department stating your family size during the relevant time frame.

3. Determine the Lowest IDR Plan Amount

• Your buyback amount will be calculated based on the lowest IDR plan you were eligible for during the buyback months.

• If your 10-Year Standard Plan amount is lower than the calculated IDR amount, the 10-Year Standard amount will be used instead.

• The 10-year Standard Repayment Plan often has higher monthly payments compared to IDR plans, which are based on your income and family size. It is a fallback option if your calculated IDR payment is higher or you don’t provide the required information within 30 days.

Important Considerations

• Provide complete and accurate information to the best of your knowledge when submitting your tax information and family size statement. Contact the Education Department for guidance if there are any issues or discrepancies.

• If you don’t provide the required information within 30 days, your buyback amount will be determined based on the 10-year Standard Repayment Plan. If you miss the 30-day deadline, contact the Education Department to discuss your options.

• You can use the Federal Student Aid website’s Loan Simulator to estimate your IDR plan payments and get a rough idea of your potential buyback amount before submitting your request.

Example 1: If you were not on an IDR plan and provided your tax information and family size for the buyback period, your amount will be calculated based on the lowest IDR plan you were eligible for.

Example 2: If your lowest IDR payment would have been $100 per month based on your income and family size, that amount will be used to calculate your total buyback cost.

Now that you understand how to buy back months and calculate your buyback amount let’s explore strategies to help you maximize the benefits of the PSLF Buyback Program.

1. Enroll in an Income-Driven Repayment Plan

• IDR plans base your monthly payment on your income and family size, making them more affordable than other repayment options.

• An IDR plan can help you maintain lower monthly payments, potentially reducing your buyback costs.

• If your income is low enough, your IDR plan payment could be as low as $0 per month, and these months still count towards the 120 payments required for PSLF.

2. Certify Your Qualifying Employment Annually

• Submit the PSLF form annually or whenever you change employers to make sure your qualifying employment is up to date.

• This helps you stay on track with your PSLF progress and makes it easier to identify eligible buyback months when the time comes.

3. Focus on Buyback Months Strategically

• If you have a mix of eligible and ineligible loans, focus on buying back months that correspond to your Direct Loans first, as these are the only loans eligible for PSLF.

• Consider buying back months when your income was lower, as this may result in a lower buyback amount based on your IDR plan calculation.

4. Seek Guidance From Your Loan Servicer

• If you have questions about your situation or need help determining the best buyback strategy, please contact your loan servicer.

• They can provide personalized guidance based on your loan history, employment record, and financial circumstances.

5. Consider the Long-Term Financial Benefits

• While buying back months may require an upfront cost, the long-term financial benefits of PSLF are often worth it.

• By achieving loan forgiveness sooner, you can free up financial resources and focus on other important financial goals, such as saving for retirement or investing in your future.

If you have consolidated your loans, the key takeaway is that you can only buy back months on your current consolidation loan.

You cannot buy back months from:

• The loans included in the consolidation OR

• Any period before the first disbursement date of the consolidation loan.

To illustrate this, let’s consider a few examples:

Example 1: Simple Consolidation

Let’s say you had two Direct Loans you combined into a new Direct Consolidation Loan on January 1, 2020. You cannot buy back any months before January 1, 2020, even if those months were spent in qualifying employment. You can only buy back eligible months starting from January 1, 2020.

Example 2: Multiple Consolidations

Now, suppose you consolidated two Direct Loans on January 1, 2020, and then consolidated another Direct Loan with your existing consolidation loan on July 1, 2020. Here, you can only buy back eligible months starting from July 1, 2020, as that is the most recent consolidation date.

The PSLF Buyback program is just one of several recent flexibilities introduced to help borrowers achieve loan forgiveness more easily. The other student loan forgiveness program you should know about is the IDR account adjustment.

Here’s how the PSLF Buyback program interacts with the IDR account adjustment.

The IDR account adjustment is a one-time review of your student loan account to grant PSLF credit for months spent in repayment, forbearance, economic hardship deferments, and deferments before 2013 if they weren’t in-school deferments.

This adjustment is separate from the PSLF Buyback program and does not require any action or payment from borrowers.

The Education Department encourages borrowers to wait for the IDR account adjustment to be applied to their account before submitting a buyback request. This is because the IDR account adjustment may automatically credit some months you were planning to buy back, saving you money.

If you’ve already submitted a PSLF form and have approved qualifying employment, you should see updates to your account starting this July. These updates will include PSLF credit for months of eligible deferment or forbearance at no additional cost.

Related: Does Forbearance Count Towards PSLF?

After the IDR account adjustment is complete, you can assess which additional months you still need to buy back to reach the 120 qualifying payments required for PSLF.

Note: The IDR account adjustment and the PSLF Buyback program can work together to help you achieve loan forgiveness more quickly. But, they are separate programs with different eligibility requirements and processes.

Related: Do Nurses Qualify for Public Service Loan Forgiveness?

While the PSLF Buyback program offers a valuable opportunity for borrowers to achieve loan forgiveness more quickly, it’s essential to be aware of potential downsides and risks associated with participating in the program:

1. Processing Delays and Uncertainty: Many borrowers have reported significant delays and a lack of communication from loan servicers after submitting their buyback requests. These delays can cause anxiety and uncertainty, as borrowers are left unsure of the status of their applications and the timeline for loan forgiveness.

2. Financial Costs: The buyback program requires borrowers to pay a lump sum to cover the months they wish to buy back. This could be financially burdensome, especially if the payments are higher than expected. Review the buyback amount calculation carefully and consider your financial situation before moving forward.

3. Eligibility Concerns: Borrowers who have consolidated their loans or have a mix of loan types may face more challenges when determining their eligibility for the buyback program. Carefully review the eligibility requirements and seek guidance from your loan servicer if you have any questions.

4. Complexity and Confusion: The buyback process can be complex, with varying eligibility requirements and documentation needed. You may experience confusion or uncertainty as you go through the process. This can lead to delays or missed opportunities.

5. Impact on Financial Planning: The buyback program can affect your long-term financial plans, such as deciding when to leave a job based on the timeline for loan forgiveness. Delays or unexpected costs could affect these plans significantly.

Before participating in the PSLF Buyback program, consider these potential risks and downsides. Assess your financial situation, review the eligibility requirements, and gather all necessary documentation to reduce the risk of delays or unexpected costs.

Usually, you cannot receive a refund through the PSLF Buyback Program. According to the Education Department, there are two important factors to consider:

1. You can only buy back enough months to qualify for forgiveness under PSLF or TEPSLF. You cannot buy back earlier months to reverse payments made in more recent months for a refund.

2. You can only receive a refund if your payment exceeds the amount specified in the PSLF Buyback Agreement and you have no other outstanding loans.

For example, let’s say you have made 100 qualifying payments and need to buy back an additional 20 months to reach the 120 payments required for PSLF. If you’ve already made payments for those 20 months, you cannot buy back earlier months to effectively “undo” or reverse those payments and receive a refund.

Additionally, suppose your buyback payment is higher than the amount stated in your PSLF Buyback Agreement, and you have no other outstanding loans. In that case, you may be eligible for a refund of the excess amount.

However, if you have other outstanding loans, you will not receive a refund, even if your payment exceeds the amount in the agreement.

No, the amount forgiven through PSLF buyback is not considered taxable income for federal tax purposes, according to the IRS. This means you won’t face a hefty tax bill after achieving forgiveness through the PSLF Buyback Program.