Public Service Borrowers Face Increased Challenges for Student Loan Relief

The Department of Education ended the SAVE income-driven repayment plan and changed PSLF buyback rules. That action may raise payments for borrowers who want to buy back months spent in deferment or forbearance.

Key procedural change

Borrowers pursuing Public Service Loan Forgiveness can buy back months in deferment or forbearance to reach the 10-year threshold. Previously, buyback amounts were calculated using the SAVE formula, which generally yielded lower monthly payments.

How payments will be calculated

The Federal Student Aid office said it will alter the method for determining buyback amounts. If a borrower was not on IBR, PAYE, or ICR on either side, FSA will request income and family size.

Scope and numbers

Thousands of borrowers could face larger monthly bills as a result. The Department reported 88,170 PSLF buyback applications pending as of February 28. In February, the Department received 4,180 buyback applications and processed buyback relief for 12,640 borrowers.

Other developments and timing

Borrowers enrolled in SAVE will begin receiving notices to transition to a new repayment plan in July. Also in July, a new federal rule will restrict who qualifies as public service. It is unclear how the rule will be implemented.

New rule and legal challenges

The rule narrows the definition of public service. It would bar employers that participate in “illegal activities” from qualifying. Nonprofit groups have filed lawsuits, and lawmakers and advocates warn it could block relief for some borrowers.

The SAVE elimination and the new rule together create increased challenges for public service borrowers and for student loan relief. Officials say details and implementation remain unclear.