US Department of Education: PSLF Borrower Challenges Rise With Policy Shifts

• The ABA is closely monitoring new challenges for Public Service Loan Forgiveness borrowers, including processing delays and payment record errors.
• The Department of Education confirmed in August it reduced some borrowers' qualifying payment counts, citing corrections for past coding errors.
• A 15-day grace period for timely PSLF payments was quietly eliminated by the Department of Education in July, requiring payments by the due date.
• New Department of Education guidance restricts the PSLF Buyback program, disallowing credit for payments made under two new repayment plans.
• A significant backlog of approximately 88,000 applications for the PSLF Buyback program existed as of April, with more recent reports indicating around 82,000 pending requests in October.

This situation has, in essence, functionally ended the buyback program for many.

The American Bar Association (ABA) is closely monitoring a rise in difficulties confronting individuals pursuing Public Service Loan Forgiveness (PSLF). This program, established by Congress in 2007 with the ABA's backing, aims to discharge remaining federal student loan balances for borrowers who complete 120 qualifying payments while employed full-time in public service roles. However, the journey to forgiveness is now fraught with new obstacles, including significant processing delays, inaccuracies in payment records, a growing backlog of applications, and abrupt shifts in Department of Education (DoE) policies, some introduced without prior public announcement.

Adding to these concerns are substantial staffing reductions within the DoE, specifically a 40% decrease in personnel at the Federal Student Aid office. This reduction raises questions about the department's capacity to address and resolve these mounting issues in a timely manner. A notable problem involves numerous borrowers who have not received credit for qualifying loan repayments made since June, with the DoE offering no explanation or information regarding these missing payment counts.

Further complicating matters, the Department of Education confirmed in August that it had reduced the number of qualifying payments for some borrowers, potentially delaying their loan forgiveness. Initially, the department characterized these falling payment counts as a "data issue." However, the DoE later clarified that these adjustments were intentional, designed to correct coding errors that occurred during the Biden administration, which had led to inaccurate payment counts for certain individuals.

While some of these PSLF credit reversals might stem from payments made under repayment plans that did not qualify for the program, the Department of Education has not provided a comprehensive explanation of this process. This lack of transparency has led some borrowers to believe their payment counts were erroneously removed. Moreover, without a formal announcement, the department quietly eliminated the 15-day grace period for timely PSLF-eligible payments in July. As of July 1, payments must now be made "on or before the due date" to be considered qualifying under PSLF.

Confusion and concern are also mounting over a "clarification" issued by the Department of Education regarding the PSLF Buyback program. This initiative was designed to allow public service employees to receive credit for months when their loans were in deferment or forbearance—periods typically ineligible for PSLF—by making retroactive payments equivalent to what they would have paid under a standard repayment plan. However, new DoE guidance now prohibits borrowers from buying back credit for payments made while enrolled in two specific new repayment plans: the Repayment Assistance Plan or the Tiered Standard Repayment Plan. These plans were established by legislation signed into law by President Donald Trump in 2025.

The PSLF Buyback program is also grappling with a substantial application backlog, which stood at approximately 88,000 as of April, though more recent reports in October indicate around 82,000 pending requests. This delay means some borrowers have waited over two years to receive credit for retroactive payments, effectively compelling them to remain in their public service jobs and continue loan repayment for longer than originally required. This situation has, in essence, functionally ended the buyback program for many. Separately, on October 21, the Department of Justice withdrew its appeal of two court rulings that had stayed controversial actions by the Department of Education.

Lawyers advising clients (or themselves) on Public Service Loan Forgiveness must be aware of the increasing difficulties, including payment count errors, policy changes, and buyback program limitations. They should scrutinize payment records, understand the implications of new Department of Education guidance, and prepare for potential delays or disputes in achieving loan forgiveness.

Source: Original reporting via legal news analysis