According to Forbes, the Department of Education has rolled out a new pathway to student loan forgiveness for public service borrowers this fall.
$2,000 Quarter? Check Your Pockets Before You Use This 2004 Coin Read: Owe Money to the IRS? Most People Don’t Realize You Can Do This — Today
The new option will allow borrowers in some specific circ*mstances to “buy back” certain deferment and forbearance periods so that they can count toward Public Service Loan Forgiveness, or PSLF. While the Public Student Loan Forgiveness (PSLF) Buyback Program has yet to be widely adopted, the new program aims to provide an alternative method of student loan forgiveness for PSLF borrowers.
Sponsored: Get Paid To Scroll. Start Now
Student Loan Relief via PSLF Buyback Program
The Public Student Loan Forgiveness (PSLF) program is a federal program aimed at borrowers whose line of work meets certain criteria. Borrowers who work at least 30 hours per week as an employee of a government organization or qualifying nonprofit can see total discharge of their remaining student loan balance after making 10 full years of qualifying payments (which equates to 120 qualifying payments).
While eligibility for the PSLF program has historically been very strict, the Biden administration implemented new rules in 2023 that make it easier for PSLF program applications to qualify for full student loan balance discharge. This includes allowing some forbearance and deferment periods, such as AmeriCorps forbearances, military-related deferments, hardship deferments and mandatory administrative forbearances to be included when calculating eligibility for loan discharge.
Other deferment and forbearance periods that weren’t included in the recent regulatory changes could potentially count toward PSLF through the new buyback program. This option allows borrowers to have these non-qualifying periods counted toward student loan forgiveness — if they pay the equivalent of what they would’ve at the time had they been enrolled in a qualifying PSLF repayment plan. Essentially, PSLF borrowers can pay for the periods in which they were not making payments in order to qualify for relief.
There are several important guidelines to keep in mind when considering this program. You can only buy back these months of deferment or forbearance if:
Buying back these months will complete your total of 120 qualifying PSLF payments.
You have approved qualifying employment for these same months.
You still have an outstanding balance on your loan(s).
How Loan Forgiveness Amounts Are Determined Through the Buyback Program
In regard to qualifying deferment and forbearance periods on eligible federal student loans, the Education Department will require borrowers to pay the equivalent amount based on what their loan payment amount would have been during the deferment or forbearance for the past months you’re buying back.
In order to make payments, the PSLF program typically requires borrowers to be in either an Income Driven Repayment (IDR) plan, in which payments are based on their income, or a 10-year Standard plan. If a borrower was in a period of deferment or forbearance while on an IDR plan, the Education Department will base the buyback on the lower of the two monthly payments before or after the specified deferment or forbearance period. If the borrower wasn’t enrolled in an IDR plan during the deferment or forbearance period, they’ll be required to submit a copy of their tax return and family size details for the periods in question.
“Your payment amount will be based on the lowest IDR amount you were eligible for at the time of the deferment or forbearance,” the Education Department has announced. “If the 10-year standard payment is lower than your calculated IDR payment, then the 10-year Standard payment amount will be used.”
The purpose is to determine what the borrowers estimated monthly payments would have been at that time had they been enrolled in an IDR plan during the period that the borrower wants to buy back.
Education Department Encourages PSLF Borrowers To Wait for Account Adjustments
Currently, the Education Department is implementing an IDR Account Adjustment for PSLF borrowers. This adjustment allows many past periods of deferment and forbearance to possibly count toward student loan forgiveness for both IDR and PSLF borrowers. The Department’s review is already underway and will continue through summer 2024. They’re asking that borrowers wait on submitting buyback requests until this process is complete.
Borrowers who meet the criteria to qualify for the PSLF buyback program need to submit a request for PSLF reconsideration. Borrowers must include this specific language when submitting the 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.”
Graham Stephan: 4 Steps To Jump From Middle Class to Wealthy
Borrowers should also provide details on the exact months and years covered by their buyback request. You can always review your loan history and data on StudentAid.gov if you’re not sure.
More From GOBankingRates
I'm a Financial Expert: Here's How You Can Save $10K or More in the Next Year
How to Get $340/Year in Cash Back -- for Things You Already Buy
4 Reasons You Should Be Getting Your Paycheck Early, According to An Expert
10 Ways to Turn Your Six-Figure Salary Into Generational Wealth
This article originally appeared on GOBankingRates.com: Student Loan Forgiveness ‘Buyback’ Program Could Offer More Relief to Borrowers — Do You Qualify?
Eligibility. You are eligible for this opportunity only if you already have 120 months of qualifying employment and buying back these months of deferment or forbearance will result in forgiveness under PSLF
PSLF
PSLF forgives the remaining balance on your Direct Loans after you have made 120 qualifying payments while working full-time for a qualifying employer. Only payments made under certain repayment plans (primarily income-driven repayment plans) qualify for PSLF.
Borrowers with only undergraduate debt would qualify for forgiveness if they first entered repayment 20 years ago (on or before July 1, 2005), and borrowers with any graduate school debt would qualify if they first entered repayment 25 or more years ago (on or before July 1, 2000).
If you have loans that have been in repayment for more than 20 or 25 years, those loans may immediately qualify for forgiveness. Borrowers who have reached 20 or 25 years (240 or 300 months) worth of eligible payments for IDR forgiveness will see their loans forgiven as they reach these milestones.
If you qualify for forgiveness, cancellation, or discharge of the full amount of your loan, you won't have to make any more payments on that loan. If you qualify for forgiveness, cancellation, or discharge of a part of your loan, you'll need to pay back the remaining balance.
Defaulted Direct Loans are not eligible for PSLF and payments made while the loan was in default cannot count toward the 120 required payments. However, a defaulted loan may become eligible for PSLF if you resolve the default. Learn how to get your loan out of default.
You're not eligible for federal student loan forgiveness programs if you have private loans, but there are other strategies for managing private loan debt.
Final answer: Being in an entry-level position for 2-3 years may not make you eligible for loan forgiveness, whereas having a qualifying public service job, being on an income-driven repayment plan, and teaching in a low-income public school may make you eligible for loan forgiveness.
From this point on, your days of making monthly student loan payments are over. That is, unless, only a portion of your debt is canceled. If you still owe a remaining balance, you will still continue to owe monthly payments. » MORE: Student loan forgiveness: What's getting fixed?
If you received a Pell Grant in college and meet the income threshold, you will be eligible for up to $20,000 in debt relief. If you did not receive a Pell Grant in college and meet the income threshold, you will be eligible for up to $10,000 in debt relief.
A final review of your account will be done to process forgiveness, which will take at least 90 business days. You are required to continue making payments while your form is being processed, unless your account is in a forbearance status.
When your student loan debt is forgiven, you'll be sent notice of how much is canceled and whether you still owe anything more. If your loan is discharged because of fraud or deception on the part of the school, you may get a refund of some payments.
Thousands of student-loan borrowers are still waiting for relief under the Sweet v.Cardona settlement. While the settlement deadline for relief was January 28, 2024, about 60,000 borrowers are still waiting.
Log in to StudentAid.gov to track your PSLF progress. For updates on your application status, visit MOHELA's website or contact them at 1-855-265-4038. Be aware that MOHELA is experiencing historic submission volume that may delay response time. We appreciate your patience.
REPAYING LOANS. Due to recent PSLF regulation changes, you can buy back certain months in your payment history to make them qualifying payments for PSLF. Specifically, you can buy back months that don't count as qualifying payments because you were in an ineligible deferment or forbearance status.
In total, the Administration has now approved debt cancellation for nearly 3.9 million hard-working Americans totaling almost $138 billion in relief. Many of these borrowers planned their lives and families around the promise of forgiveness through programs such as Public Service Loan Forgiveness (PSLF).
Starting in July 2024, payments for borrowers with only undergraduate student loans will be cut in half. Those monthly payment amounts are currently calculated to be 10% of your discretionary income, but in July 2024 that number will drop to only 5% of your discretionary income.
Parent borrowers may be eligible for Public Service Loan Forgiveness (PSLF) after making 120 qualifying payments (ten years). Parent PLUS loans are eligible if they are in the Direct Loan program or included in a Federal Direct Consolidation Loan.
If you have worked in public service (federal, state, local, tribal government or a non-profit organization) for 10 years or more (even if not consecutively), you may be eligible to have all your student debt canceled.
Introduction: My name is Carlyn Walter, I am a lively, glamorous, healthy, clean, powerful, calm, combative person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
