3 New Pathways To Student Loan Forgiveness Through PSLF Under New Rules

Public Service Loan Forgiveness (PSLF) is one of the most popular federal student loan forgiveness programs, and it has been in the news a lot during the last two years. 

Historically, PSLF has been beset by widespread, well-documented problems, including poor loan servicing practices, bad record-keeping and inadequate oversight by the Department of Education. As a result, denial rates for PSLF applications were as high as 99%. 

The Biden administration implemented two broad initiatives designed to rectify these historical problems. The Limited PSLF Waiver, which ended in October 2022, temporarily relaxed PSLF program rules to allow more borrowers to qualify for relief. And the IDR Account Adjustment, a related initiative that is still ongoing, has extended many of those benefits. As a result, the number of borrowers approved for student loan forgiveness under PSLF has soared from around 7,000 prior to 2022 to over 700,000 through last fall, according to Education Department data.

In addition to these temporary initiatives, the Biden administration implemented new PSLF rules that went into effect in July 2023. These new regulations provide additional pathways to relief for borrowers by expanding eligibility criteria for qualifying payments and qualifying employment. Here’s a breakdown.

Additional jobs can qualify for student loan forgiveness through PSLF

Historically, only direct W-2 employment for a qualifying nonprofit or government organization could be eligible for PSLF. And that employment typically must have been full-time as defined by the employer, and at least 30 hours per week on average.

The new PSLF rules that went into effect in July 2023, however, relax these rules in several ways:

1. Simplifies the definition of “full time”

The regulations broadly simplify the definition of “full time” to be 30 hours per week on average, regardless of the employer’s internal definition of full-time. 

2. Provides a new option for individuals working on a per-credit-hour basis

The new PSLF regulations also provide an alternative pathway to qualifying employment for faculty and professors who work on a per-credit-hour basis. These individuals have often had difficulty getting their employment to count toward PSLF if their institutions were unwilling to indicate that they were working for more than the number of weekly credit hours they taught (even though, as a practical matter, faculty spend a lot more time per week working than just the official credit hours). 

Under the new rules, “If you are a non-tenure or adjunct faculty member at an institution of higher education and are paid solely for the credit hours you teach, you meet the definition of full-time if you are employed the equivalent of 30 hours per week as determined by multiplying each credit or contact hour taught per week by at least 3.35,” according to Education Department guidance.

3. Creates an exception for some contractors to qualify

The new rules also allow for an exception to the historic practice that only W-2 employment for a qualifying organization can be eligible for PSLF. The regulations carve out a narrow pathway for contractors to potentially qualify. 

“If you work in a state that has laws that prevent an otherwise qualifying employer from hiring employees directly to fill positions or provide services,” an individual who is contracted to provide work for that employer – but is not classified as a W-2 employee – can potentially have that employment count for PSLF under the new regulations. “This is most common in states that have laws preventing health care facilities from hiring employees directly, so they contract with physicians’ groups to provide services,” says department guidance.

Related: Public Service Loan Forgiveness Jobs: How to Know If Your Employer Qualifies

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Some deferment and forbearance periods can count toward PSLF

The new PSLF regulations also expand what can count as a qualifying “payment” toward student loan forgiveness. Under the prior rules, only time spent in repayment under an income-driven repayment or 10-year Standard plan could count (with some limited exceptions). But under the updated rules, certain deferment and forbearance periods can count as qualifying months toward PSLF, including:

• Cancer treatment deferment.
• Economic hardship deferment.
• Military service deferment.
• Post-active-duty student deferment.
• AmeriCorps forbearance.
• National Guard Duty forbearance.
• U.S. Department of Defense Student Loan Repayment Program forbearance.
• Certain administrative forbearances related to local or national emergencies or military mobilizations and or mandatory administrative forbearances provided to borrowers for collecting supporting documentation.

This is less generous than the temporary flexibilities that were provided by the Limited PSLF Waiver and the ongoing IDR Account Adjustment, which can also count extended forbearance periods as “qualifying” for purposes of PSLF. 

However, those initiatives are temporary, with the account adjustment set to end in the spring of 2024. The updated PSLF rules will allow for certain deferment and forbearance periods to count toward loan forgiveness on a more permanent basis, even after these temporary waiver initiatives have concluded. 

Related: Education Department Updates Guidance on New Changes to PSLF and Income-Driven Repayment

Student loan forgiveness buyback option for PSLF

The new PSLF regulations also include a safe harbor provision that allows borrowers to “buy back” certain past periods of deferment and forbearance that otherwise don’t count toward loan forgiveness.

“PSLF buyback is available for months on Direct Loans with a positive balance that coincide with qualifying employment when you were: in deferment, in forbearance, or in deferment or forbearance after the first disbursement date of a Direct Consolidation Loan,” says Education Department guidance. 

How PSLF buyback works

Borrowers will be required to make a lump sum payment for the buyback period based on what they would have paid during those months if they had been in an IDR plan or the 10-year Standard plan. 

“We’ll request tax information for that calendar year to determine the amount that you would have paid under an IDR plan. If your deferments or forbearances cross over multiple tax years, then we will need your tax information for each year.” Once the Education Department determines the buyback amount, borrowers will be notified and presented with a buyback agreement, and they will then have 90 days to pay.

PSLF buyback restrictions

While this option provides an important additional pathway to student loan forgiveness for borrowers pursuing PSLF, there are a number of restrictions.

“You can buy back these months only if you still have an outstanding balance on your loan(s), you have approved qualifying employment for these same months, and buying back these months will complete your total of 120 qualifying PSLF payments,” notes the department, allowing the borrower to qualify for student loan forgiveness. 

In addition, “You can’t buy back months during which your loan was in any of the following statuses: in-school or in-origination, in-grace, default, bankruptcy, or total and permanent disability monitoring,” says the department guidance. “You can’t buy back any months on loans that are not a Direct loan, in a paid-in-full status, in a forgiven status, in a discharged status, or included in a Direct Consolidation Loan.”

Borrowers must submit a buyback request via the PSLF Reconsideration portal using specific language outlined in the department’s PSLF buyback guidance.