Major Update For 9 Million Borrowers About Huge Student Loan Forgiveness Threat From PSLF And IDR Delays

Forbes

21-05-2025

A growing backlog in PSLF and IDR processing is delaying student loan forgiveness and putting public ... More servants' eligibility at risk
As millions of public service workers anxiously await promised student loan forgiveness, a new threat has emerged: due to massive processing delays in federal forgiveness programs, many borrowers may lose eligibility even after making 120 qualifying payments. When forgiveness is granted, the Public Service Loan Forgiveness program requires borrowers to be still employed by a qualifying public service employer. Now, lengthy delays in processing Income-Driven Repayment and PSLF buyback applications mean that borrowers who have already completed a decade of service or are close to it could be denied forgiveness, not because their payments won't count, but because they might retire, change jobs, or get laid off before the government finalizes their discharge. This is another headwind for the over 9 million public service workers with federal student loans eligible to pursue PSLF, the 1.3 million of those who are actively pursuing it, and the 50,000 borrowers currently waiting for their PSLF buyback applications to be processed.
New data reveal a historic backlog in student loan forgiveness processing. In a recent court-mandated status report, the Education Department admitted that as of April 30, it had approved only around 79,000 IDR plan applications, while nearly 2 million applications remain unprocessed. This 96% backlog has effectively paralyzed the IDR enrollment system and, by extension, PSLF forgiveness for many borrowers. Even if all 120 qualifying payments have been made, forgiveness cannot occur until these applications are reviewed and approved. The logjam has created a severe student loan forgiveness delay for anyone relying on IDR or PSLF programs to cancel their debt after years of payments.
PSLF borrowers are acutely impacted. Under newly expanded rules, PSLF applicants can retroactively buy back specific past periods, for example, months spent in deferment or forbearance, to count toward their 120-payment requirement. But progress has been glacial: 49,318 PSLF buyback requests were pending as of the end of April, and fewer than 1,500 were processed that month. Less than 3% of pending PSLF buyback applications have been resolved, highlighting the severity of the backlog. According to a court filing, these pending cases likely represent about 49,000 public service workers who have met all PSLF requirements and should have their loans canceled under federal law yet remain in limbo. In other words, tens of thousands of teachers, nurses, government employees, and non-profit workers are technically eligible for immediate debt forgiveness, but bureaucratic delays are postponing their relief indefinitely.
One major culprit behind the delays is the legal battle over President Biden's new IDR plan, the SAVE plan. Last year, a group of state attorneys general sued to block SAVE, and in February 2025, the Eighth Circuit Court of Appeals issued an injunction halting the plan's implementation. In response, the Education Department abruptly shut down all online IDR applications and halted processing pending requests for weeks, plunging millions of borrowers into uncertainty. During this freeze, no borrower could change into a new IDR plan, even if they needed one to keep their payments affordable or to qualify for PSLF. Access was partially restored by late March after a lawsuit, but officials did not resume processing IDR enrollments until mid-May. The result is a mountain of stalled IDR plan changes that must be cleared.
Compounding the issue, roughly 8 million borrowers enrolled in the SAVE plan were placed into a special litigation forbearance status due to the injunction. These borrowers have had their repayment plans paused against their will. Months spent in this limbo typically do not count toward PSLF or IDR forgiveness since no payments are being made. Borrowers had received mixed messages about whether this forbearance time would be credited. The Education Department has now confirmed that time spent in the SAVE plan litigation forbearance can be reclaimed through the PSLF buyback program.
However, that is only a partial consolation: to buy back those months, borrowers must make extra lump-sum payments for each month of forbearance and wait for those payments to be processed and credited. Given the significant backlog, it could be many months or even years before affected borrowers see their PSLF counts updated.
The PSLF employment requirement is now the core threat to these borrowers' long-awaited forgiveness. Under program rules, a borrower must work full-time for a qualifying public service employer while making the 120 payments, when they apply for forgiveness, and when the forgiveness is officially granted. There is no partial forgiveness in PSLF; it's all or nothing.
Usually, this requirement isn't a problem: borrowers apply once they hit 120 payments and receive forgiveness within a few months, all while still on the job. However, the wait could be much longer, with processing grinding to a halt. The risk is that if a borrower retires, switches to a private-sector job, or is laid off before the government finalizes their forgiveness, they could be disqualified from PSLF at the finish line.
This delay could impact retirement plans for many public-sector and non-profit workers. It could also stifle mobility as workers facing burnout or better opportunities may feel trapped in their jobs until their debt is cleared.
These situations are within the worker's control; however, there's also the unpredictable risk of job loss. Recent budget strains and organizational changes have led to layoffs at federal and state agencies. The Education Department underwent mass layoffs and staffing cuts in early 2025, contributing to the processing slowdown. A public service borrower can do everything right. However, it will still be derailed by an involuntary layoff, a real possibility in today's economic climate, and the stated intention of President Trump's administration to cull the federal workforce. "At least 121,000 federal workers have been laid off or targeted for layoffs in the three months since President Donald Trump's second term began," according to a CNN analysis. "It's a vast number that doesn't count those placed on administrative leave or who took voluntary buyouts," the report noted. Unfortunately, PSLF does not provide a safety net for such cases. You're ineligible if a qualified employer does not employ you at the moment of forgiveness.
For now, PSLF seekers should remain in qualifying employment until their student loan forgiveness discharge is completely processed, no matter how long it takes. That may mean postponing retirement or declining a private-sector opportunity for longer. If you have reached 120 payments and submitted your PSLF application, continue working for your public service employer until you see a $0 loan balance. Some services may allow a brief payment forbearance during the wait (so you don't have to make additional payments after 120), but be cautious: any break in qualifying employment before forgiveness is finalized could nullify your approval. If you keep paying past 120 out of caution, the government has said it will refund any overpayments once your loan is forgiven. In short, don't leave your public service job until the finish line is officially crossed.