Student loan change impacts payments for tens of thousands

A quiet policy change at the U.S. Department of Education is set to increase costs for tens of thousands of federal student loan borrowers.

The update affects borrowers seeking relief through Public Service Loan Forgiveness (PSLF) Buyback, a relatively new pathway that allows certain past periods of non‑payment to count toward loan cancellation.

Specifically, the Education Department has changed how required lump‑sum payments under that program are calculated, which could make forgiveness significantly more expensive for many borrowers with pending applications.

Why It Matters

For borrowers nearing the finish line on loan forgiveness, higher buyback costs could pose a major financial hurdle. 

Many applicants turn to PSLF Buyback specifically to resolve small gaps in their payment count, and a larger‑than‑expected lump‑sum bill could delay or derail their ability to secure cancellation.

The change also comes amid broader upheaval in the federal student loan system, including the phase‑out of the SAVE plan and ongoing adjustments to income‑driven repayment options, adding another layer of uncertainty for borrowers pursuing long‑term relief.

What To Know

The Education Department recently modified the methodology used to calculate PSLF Buyback payment amounts. Under the original program, borrowers can make a one‑time lump‑sum payment to retroactively convert certain deferment or forbearance periods into qualifying PSLF payments. If approved, those periods count toward the 120 payments required for full loan forgiveness. 

However, the department’s latest change alters how those lump‑sum amounts are determined. As a result, some borrowers, particularly those who were enrolled in the now‑winding‑down SAVE income‑driven repayment plan, may now owe substantially more to receive the same credit toward forgiveness.

The change could impact nearly 90,000 borrowers who currently have pending PSLF Buyback requests. These borrowers are typically working in qualifying government or nonprofit jobs and are attempting to resolve gaps in their repayment history that would otherwise delay or block loan cancellation.

The PSLF Buyback was first launched in 2023 and was designed to help borrowers who had periods of deferment or forbearance, often related to administrative issues or broader policy pauses, that did not count toward forgiveness under standard PSLF rules.

Under traditional PSLF rules, borrowers must make 120 qualifying monthly payments while employed in eligible public service roles. Most do so under income‑driven repayment plans such as ICR, IBR, PAYE, or SAVE. Periods when no payment was due generally do not count. 

PSLF Buyback allows borrowers to “buy back” some of those non‑qualifying months by paying what they would have owed had they been in repayment at the time. 

But the Education Department’s recalculation change means that, for some borrowers, those hypothetical payments are now being assessed at higher amounts than before. 

What People Are Saying

Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: “This latest student loan change is yet another reminder that borrowers can end up paying far more for relief when repayment programs get tied up in policy and court fights. For nearly 88,000 borrowers, the cost of getting credit toward forgiveness has increased because months spent in SAVE-allowed forbearance may now have to be bought back at significantly higher amounts, with some examples being double or even triple the cost of what the payment would have originally been.”

Drew Powers, the founder of Illinois-based Powers Financial Group, told Newsweek: “This is another time where the individual borrower is stuck in the middle of politics.  Borrowers who switched to the SAVE repayment plan were in forbearance status for almost two years, not making payments while the politicians battled it out.  Now that SAVE has been deemed illegal, those borrowers will not only have to change to a more costly repayment plan, but they also have to use the same costly repayment plan to calculate their buyback amount for PSLF.”

What Happens Next

Borrowers with pending applications may only discover the impact of the Education Department’s update once they receive updated buyback calculations. 

This new approach could significantly increase out‑of‑pocket costs for thousands of public service workers seeking forgiveness under the existing law. 

“For this group of borrowers, it could be incredibly frustrating as they technically followed the rules only to find that the path to forgiveness has become more expensive and more complicated,” Beene said.

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