Student loan forgiveness for public servants could be pricier to access, after new changes
#Public Service Loan Forgiveness #PSLF Buyback #SAVE plan #Student loans #Education Department #Income-Based Repayment #Loan Forgiveness #Deferment
📌 Key Takeaways
- The Education Department will no longer use the SAVE plan formula to calculate buyback offers for periods after July 1, 2024, leading to higher costs.
- Buyback offers will now be based on less generous plans like IBR, potentially doubling the required payment percentage of a borrower's income.
- Over 88,000 borrowers are stuck in a processing backlog, waiting for decisions on their buyback applications.
- Experts recommend borrowers still apply for an assessment but carefully compare the buyback cost to simply resuming income-driven payments.
📖 Full Retelling
The U.S. Department of Education, under the Trump administration, has implemented a policy change that will likely increase the cost for many public service workers to access student loan forgiveness through the Public Service Loan Forgiveness (PSLF) program's buyback option. This change, which was rolled out without significant public announcement, alters how monthly payment amounts are calculated for borrowers seeking to retroactively pay for periods of deferment or forbearance to count toward their required 120 payments. The shift primarily affects those whose missed payments occurred on or after July 1, 2024, and stems from the department's decision to stop using the more affordable SAVE plan formula for calculating these buyback offers.
The core of the change lies in the calculation method for the 'buyback' offers the Education Department sends to applicants. Previously, borrowers could have their offer calculated under the Saving on a Valuable Education (SAVE) plan, a Biden-era initiative that bases payments on as low as 5% of a borrower's discretionary income. The new policy dictates that for relevant periods after July 2024, offers will instead be calculated using older plans like the Income-Based Repayment (IBR) plan, which typically takes 10-15% of income. This can result in significantly higher lump-sum payments to buy back time, potentially putting the option out of reach for many. Advocates like Carolina Rodriguez of the Education Debt Consumer Assistance Program warn that these higher costs could force borrowers to drain savings or abandon the buyback strategy altogether.
Compounding the issue is a massive processing backlog at the Education Department, with over 88,000 applicants awaiting decisions, some for over a year. This delay occurs amid high demand, partly driven by millions of SAVE plan enrollees who were placed into administrative forbearance in mid-2024 due to legal challenges. Experts advise that despite the likely higher cost, eligible public servants—such as government and nonprofit employees—should still apply for a buyback assessment promptly due to processing delays. Once an offer is received, borrowers should compare the buyback lump sum against the cost of simply resuming payments under the most affordable current plan, as continuing with regular payments may sometimes be the more feasible path to eventual forgiveness.
🏷️ Themes
Student Debt, Government Policy, Personal Finance
📚 Related People & Topics
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Student loan
Type of loan for educational expenses
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Original Source
It may be more expensive for some student loan borrowers to access a popular debt forgiveness program , after a new policy rolled out by the Trump administration. Borrowers who were using the so-called buyback option to get their debt cleared under Public Service Loan Forgiveness will likely be subject to a higher bill, as a result of the changes. PSLF, which Congress created and President George W. Bush signed into law in 2007, allows certain not-for-profit and government employees to have their federal student loans canceled after 120 payments, or 10 years. PSLF Buyback , meanwhile, was created by the Biden administration, and allows borrowers who have hit 120 months of qualifying employment to submit a request to the U.S. Department of Education to retroactively pay for any months they missed because of a forbearance or deferment. Here's why "buyback" offers may become more expensive, and what borrowers can do about it. Trump administration won't use SAVE plan formula After you have submitted your buyback request, the Education Department is supposed to send you an offer letter. That should include the number of monthly payments you missed during your public service history, and a chance to pay that bill in exchange for student loan forgiveness. The reason borrowers may now have to pay more for that relief: The department says it won't calculate borrowers' offers using the Saving on a Valuable Education, or SAVE, plan if their deferment or forbearance was on or after July 1, 2024. The Biden administration-era SAVE plan, which was officially blocked by a federal appeals court in March, came with much lower monthly payments than other repayment plans. Under the SAVE plan, monthly payments were based on as low as 5% of a borrower's discretionary income. For comparison, the Income-Based Repayment plan takes 10% — and that share rises to 15% for certain borrowers with older loans. "Coming up with high payments may possibly prevent people from using buyback, or them ha...
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