What is the PSLF Buyback Program?
The Public Service Loan Forgiveness (PSLF) Buyback program allows borrowers to retroactively count previously ineligible months of deferment or forbearance toward their 120 qualifying payments for PSLF or Temporary Expanded PSLF (TEPSLF).
This is especially beneficial if you have completed 120 months of qualifying employment but are missing qualifying payments due to being in a non-eligible status at certain times.
Key Requirements
To qualify for the buyback, you must meet the following conditions:
Outstanding Loan Balance: You must have a Direct Loan or Direct Consolidation Loan with an outstanding balance.
Approved Qualifying Employment: The months you want to buy back must coincide with certified qualifying employment.
120 Months of Qualifying Employment: You must have already accumulated 120 months of certified qualifying employment before you request the buyback.
Why is Employment Certification Important?
Your certified employment for PSLF is critical since the buyback only applies to periods where you worked for a qualifying employer. If you’ve consolidated loans, only the months on your new consolidation loan are eligible for buyback, not the months tied to the original loans.
How Does PSLF Buyback Work?
The buyback process involves making an extra payment equivalent to what you would have paid under an income-driven repayment (IDR) plan during the months you were in deferment or forbearance. However, the required payment amount will be based on your income and family size at the time of deferment or forbearance—not your current circumstances.
Here’s the process for buying back months:
Certify Employment: Use the PSLF Help Tool to ensure all periods of qualifying employment are certified.
Review Payment Count Adjustment: The Department of Education is making updates to PSLF accounts. It’s recommended to wait for these updates as they may automatically grant you PSLF credit for some months of deferment or forbearance without requiring payment.
Submit a Request for Reconsideration: Submit a request to reconsider your payment count through the PSLF Reconsideration process. Your submission must explicitly state that you are seeking PSLF or TEPSLF discharge through buyback.
If eligible, the Department of Education will send you a buyback agreement, outlining the amount due. You’ll need to make this payment within 90 days to finalize the buyback.
Example Scenario: How Buyback Works
Imagine you've been working in public service for over 10 years but had periods where your loans were in forbearance due to financial hardship (or this current SAVE forbearance period).
Under the buyback program, you can make retroactive payments for those months, pushing your total payments to the 120 required for PSLF forgiveness.
Who is Eligible for Buyback?
You can buy back months if:
You have at least 120 months of certified qualifying employment.
You are still carrying a loan balance.
The deferment or forbearance months coincide with periods of qualifying employment.
You have not yet consolidated your loans, or the months you're buying back apply to your Direct Consolidation Loan.
Who is Not Eligible?
You are not eligible for PSLF buyback if:
You do not have 120 months of qualifying employment.
You have non-Direct Loans such as FFEL or Perkins Loans without consolidating them into a Direct Loan.
Your loans have been paid off, discharged, or forgiven.
Special Considerations for Parent PLUS Loans
Parent PLUS borrowers must calculate their buyback payment under the Income-Contingent Repayment (ICR) Plan if the loans were included in a Direct Consolidation Loan.
Frequently Asked Questions (FAQs)
Do I need to make payments while my request is being reviewed?
Yes, you must continue making your standard payments while awaiting buyback approval.
What happens if I cannot pay within 90 days?
Failure to pay within 90 days voids the agreement, and you would need to submit a new buyback request.
Is PSLF buyback taxable?
No. According to the IRS, amounts forgiven through PSLF or TEPSLF are not considered taxable income.
Can I buy back months, then consolidate my loans?
No. You cannot apply months bought back toward a Direct Consolidation Loan. The buyback only applies to the loans that existed before consolidation.
Final Thoughts
The PSLF Buyback Program offers an excellent opportunity to get loan forgiveness for borrowers who have already completed 120 months of qualifying employment. By retroactively making up for months in deferment or forbearance, you could receive forgiveness sooner than expected.
If you’re interested in exploring whether PSLF buyback is right for you, start by certifying your employment and reviewing your loan history. If you need/want help with the process, schedule your consultation today!
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