If you’re working toward student loan forgiveness through the Public Service Loan Forgiveness (PSLF) program, and your loans were in deferment or forbearance for a time, the PSLF Buyback program may help you achieve forgiveness faster. The program allows you to “buy back” forgiveness credits for months you didn’t make student loan payments because your loans were in deferment or forbearance. When you buy back those monthly payments, they then become qualifying payments for PSLF.
To be eligible, you must have an outstanding balance on your loans as well as approved qualifying employment in public service for the months in question. Buying back these months must also complete your total of 120 qualifying PSLF payments.
In this guide, you’ll learn how the PSLF Buyback program works and how it might help you achieve student loan forgiveness.
Key Points
• The PSLF Buyback program allows borrowers to buy back months their student loans were in forbearance or deferment so that they become qualifying payments for Public Student Loan Forgiveness.
• Eligibility requirements include an outstanding federal Direct loan balance and 120 months of qualifying public service employment.
• Buying back the months in question must complete a total of 120 qualifying PSLF payments.
• If approved for PSLF buyback, a borrower must send the amount owed to their loan servicer within 90 days.
• Months that loans are in default or that the borrower is in bankruptcy do not qualify for PSLF buyback.
Eligibility Criteria
To be eligible for the PSLF Buyback program, buying back the months of deferment or forbearance must result in forgiveness under PSLF or Temporary Expanded PSLF (TEPSLF). In addition, you will need to meet certain loan and employment criteria.
Qualifying Employment Requirements
Borrowers interested in the PSLF Buyback will need to meet all of the following conditions:
• At least 120 months of certified qualifying employment
• No plans to certify any additional qualifying employment
• Certified qualifying employment that includes the months of deferment or forbearance they intend to buy back
Outstanding Direct Loan Balance
To participate in PSLF Buyback, you must have a federal Direct loan with either an outstanding balance or an outstanding interest balance greater than $0.
A federal Direct loan is a type of student loan offered by the U.S. government. There are four different Direct loans:
• Direct Subsidized loans are for undergraduate students with financial need. Interest on these loans is paid by the government while students are in school and for the six-month grace period after graduation.
• Direct Unsubsidized loans are not based on financial need. Interest accrues on the loans while borrowers are in school.
• Direct PLUS loans can be taken out by graduate and professional students as well as parents of undergraduate students.
• Direct Consolidation loans combine some or all of a borrower’s federal student loans into one single loan with one loan servicer.
Ineligible Deferment or Forbearance Periods
With the PSLF Buyback, you can buy back months that don’t count as qualifying payments because your loan was in an ineligible forbearance or deferment.
To verify if your loan has been in deferment or forbearance (which would mean that you could qualify for PSLF Buyback), log into your StudentAid.gov account. On your dashboard, go to the “My Aid” tab, scroll to the loan breakdown section, and click on “view loan details” to see the status history of your loans.
How the PSLF Buyback Program Works
To take advantage of the buyback for PSLF, there are a few guidelines you need to know.
Identifying Nonqualifying Months
Certain months are ineligible for buyback. You cannot buy back any months when you were in one of the following situations.
• In the process of loan origination
• In school
• During the grace period after graduation
• If your loans were in default
• You were in bankruptcy
• If you were in the post-discharge monitoring period after qualifying for
• a Total and Permanent Disability (TPD) discharge.
You also can’t buy back loans that are not Direct loans. Other loans ineligible for PSLF Buyback include loans that were paid in full, those in a forgiven or discharged status, or loans included in a Direct Consolidation loan.
If you have loans that don’t qualify for PSLF Buyback and you’re hoping to lower your student loan payments, you might want to consider student loan refinancing. With a student loan refinance, you trade your existing loans for a new loan from a private lender. Ideally, you might qualify for a lower interest rate or better loan terms. However, it’s important to understand that if you refinance federal student loans, you’ll lose access to federal benefits such as income-driven repayment plans.
Recommended: A Guide to Refinancing Student Loans
Calculating the Buyback Payment
The amount of your buyback payment is based on what your loan payment amount would have been during the deferment or forbearance months that you’re buying back.
For example, if you were on an income-driven repayment (IDR) plan, which bases your monthly payments on discretionary income and family size, before or after the months you plan to buy back, you’ll pay the lower of the two monthly IDR payments for the months before or after deferment or forbearance.
If you were not in an IDR plan, the Department of Education will use tax information for the relevant calendar year to determine the amount you’d have paid under an IDR plan. If the standard 10-year repayment would have given you lower student loan payments than an IDR plan, you’ll pay the standard plan amount. The government may request past tax records to help calculate your payment.
Finally, if you had little to no income and would have qualified for $0 under an IDR plan, you won’t pay anything to get the buyback.
Recommended: Changing Student Loan Repayment Plans
Making the Lump Sum Payment
If you are deemed eligible for the buyback program, you’ll receive a PSLF Buyback Agreement, which will list the amount you must pay. You’ll also be given instructions on how to pay the full amount to your loan servicer within 90 days.
If you don’t pay the lump sum within that time, the agreement will be void. If you still want to proceed with the buyback, you must begin the process over again.
Application Process
To apply for the PSLF Buyback, you’ll need to submit a request. Here are the steps to take.
Submitting a PSLF Reconsideration Request
First, use the PSLF Help Tool to make sure you’ve reported all periods of qualifying employment. Then verify the months of deferment or forbearance you want to buy back and confirm that you have approved qualifying employment for them.
Next, submit a request through PSLF Reconsideration with this specific wording, “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.” You must include that statement to be considered for a buyback assessment.
Required Documentation
Documentation is not required to be sent in with your PSLF buyback request; it is optional. However, if you wish to submit backup, you can upload any documentation to support your case, such as paperwork detailing your payment history.
Timeline for Approval and Forgiveness
You will receive an automated email confirming the receipt of your reconsideration request. The DOE states that it will do an analysis of your account and respond to your PSLF Buyback request as soon as possible.
If your request is approved, you’ll receive an email with the PSLF Buyback Agreement. The agreement will provide the total buyback amount you must pay and instructions on how to do so. Your loan servicer must receive your total buyback payment within 90 days of the date the agreement was sent to you.
In the meantime, continue to make any regular monthly loan payments that are due. You’ll receive a refund later if applicable.
Associated Costs
There are no fees for PSLF buyback. However, you will have to pay the total PSLF buyback amount stipulated in your buyback agreement.
Determining the Lump Sum Payment Amount
As mentioned previously, your lump sum payment amount is based on whether you were on an IDR plan in the months before and after the months you plan to buy back, as well as the number of deferment or forbearance months you intend to buy back.
For example, say a borrower had a $60,000 loan balance with a monthly payment of $150 on an income-based repayment plan. In addition, they worked for 120 months, made 96 qualifying payments, and were in forbearance or deferment for two years.
In this case, the buyback amount would be 24 months x $150 per month, which equals $3,600.
Payment Deadlines and Procedures
The DOE will evaluate your eligibility for a buyback. If your request is approved, you’ll receive a buyback agreement via email that will tell you how much you need to pay and the procedure for doing so. Your loan servicer must receive that amount from you within 90 days.
Limitations and Considerations
The PSLF Buyback program is complicated, and it does have certain limitations. These include:
• Requires a large lump sum payment. You’ll need to pay a large amount of money in a relatively short amount of time, which means you might have to dig into your savings or emergency fund.
• The process isn’t easy. The PSLF Buyback program is complex. In addition, there’s no telling how long it might take the DOE to review and respond to your request.
• You must still owe money on student loans. You’re not eligible for the PSLF Buyback program if you’ve already paid off your student loans.
Restrictions on Eligible Periods
There are some restrictions on the periods of eligibility for PSLF buyback. To qualify, you must have:
• At least 120 months of qualifying employment that’s already certified
• Enough buy back months to reach forgiveness under PSLF or TEPSLF
• The months that you’re buying back may not include periods such as those when your loan was in default, when you were in school, during the six-month grace period after school, or when you were in bankruptcy.
Impact of Loan Consolidation
You can consolidate federal student loans into a Direct Consolidation Loan to be eligible for PSLF.
However, once you’ve consolidated your loans, you can only buy back the months on the current consolidation loan. You cannot buy back months from the loans included in the consolidation loan or for any period before the first disbursement date of the consolidation loan.
Interaction With Other Forgiveness Programs
If you are working toward forgiveness on an IDR plan and meet all the other requirements mentioned in this article, you may be eligible for PSLF and PSLF Buyback.
Forgiveness on most of the IDR plans is currently paused. However, forgiveness after the repayment term has been met is proceeding on the income-based repayment (IBR) plan because that plan was separately enacted by Congress.
Under the IBR plan, monthly payments are generally about 10% of a borrower’s discretionary income, and any outstanding balance is forgiven after 20 or 25 years.
The Takeaway
If you are pursuing student loan forgiveness through the PSLF program and your loans were in deferment or forbearance for a period of time, you may be eligible for PSLF buyback to earn credit for those months. To qualify, you’ll need to have an outstanding balance on your loans and approved qualifying employment for the months in question. And buying back those months must complete your total of 120 qualifying PSLF payments.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
FAQ
Can I buy back months from loans included in a consolidation loan?
If you’ve consolidated your loans, you can only buy back months on the current consolidation loan. You can’t buy back months from the loans that were consolidated or for any period before the first disbursement date of the consolidation loan.
What happens if I can’t make the buyback payment within the specified time?
The PSLF Buyback Agreement becomes void if you cannot repay the amount specified in the agreement within 90 days. If you miss that time frame and you still want to apply for PSLF buyback, you’ll need to submit another reconsideration request.
Are there any fees associated with the PSLF Buyback Program?
No, there are no fees associated with the PSLF Buyback program. However, you will have to pay the full buyback amount listed in your PSLF Buyback Agreement if you are approved.
How does the PSLF Buyback Program affect my loan forgiveness timeline?
The PSLF Buyback program may help you achieve forgiveness faster. That’s because the program allows you to buy back months you didn’t make student loan payments due to the fact that your loans were in deferment or forbearance. However, the months you buy back must complete your total of 120 qualifying PSLF payments.
Can I participate in the PSLF Buyback program more than once?
No you can’t complete a PSFL buyback more than once. However, if you apply for the program but fail to make your payment within 90 days, you can reapply.
photo credit: iStock/Jacob Wackerhausen
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