Public Service Loan Forgiveness Cut from 10 Years to 8, Adds 'Buyback' Option for Missed Payments

The Strengthening Efforts for Relief and Vital Incentives for Community Service and Engagement Act, or the SERVICE Act, is essentially a massive overhaul of the Public Service Loan Forgiveness (PSLF) program. If you’re a teacher, nurse, government worker, or anyone else in public service carrying federal student loan debt, this bill is designed to get you out from under that debt faster and with far less administrative headache. The headline change is significant: the required number of qualifying monthly payments for forgiveness drops from 120 (10 years) down to 96 payments (8 years), effective for any payments made since October 1, 2007.

The New 8-Year Finish Line

For years, PSLF has been notoriously difficult, often failing to deliver on its promise. This bill tries to fix that by shortening the time commitment and broadening the rules. Beyond the 8-year requirement (Sec. 2), the bill expands what counts as a “qualifying payment.” If you were on an income-based plan or a standard 10-year plan, those months count. Crucially, if you were on a non-qualifying plan but paid at least the amount due under a standard 10-year plan, that month now counts too. This is a game-changer for people who followed bad advice or were stuck on the wrong plan for a while.

Counting Time When You Weren't Paying

Life happens, and sometimes you need to hit pause on payments. The SERVICE Act acknowledges this by allowing certain periods of deferment or forbearance to count toward your 96 payments, provided you were working in public service during that time (Sec. 2). This includes pauses for military service, unemployment, economic hardship, cancer treatment, and even Peace Corps or AmeriCorps service. This means if you took an economic hardship deferment for a year while still working at your non-profit, that year of paused payments could now count as 12 qualifying payments.

Another significant change addresses the financial penalty of pausing payments. Currently, when you finish a deferment or forbearance, the interest that built up during that pause often gets capitalized—meaning it’s added to your principal balance, and you then pay interest on the interest. The bill explicitly bans this practice (Sec. 5). Moving forward, interest accrued during a pause will not be capitalized when the pause ends, saving borrowers potentially thousands of dollars over the life of the loan.

The Buyback Option: Retroactive Credit

Perhaps the most complex but powerful provision is the new “buyback payment” feature (Sec. 2). If you’ve worked in public service for at least 96 months but didn’t hit 96 qualifying payments because you were on the wrong repayment plan or a non-eligible deferment (like in-school deferment), you can now essentially purchase credit for those months.

Here’s the catch: the buyback is a single lump sum payment equal to the total amount you would have paid had you been on a qualifying repayment plan during those missed months. While this offers a path to forgiveness for past errors, it requires a significant, immediate payment. For example, if you worked at a qualifying non-profit for two years while mistakenly on an extended repayment plan, you could buy back those 24 months, but you'd have to pay the total amount of those 24 payments all at once. This is a huge benefit, but only if you have the cash on hand.

Making Sense of the Administration

To address the administrative nightmare that has plagued PSLF, the bill mandates the creation of a comprehensive online portal (Sec. 4). This portal must show you exactly which of your loans are eligible, how many payments you’ve made, and how many you have left. If your loan isn't eligible, it has to tell you why and what steps you can take to fix it. This is about transparency—giving borrowers a clear, verifiable tracker instead of relying on confusing annual letters.

Furthermore, the bill clarifies who counts as a public servant, which is critical for people working in non-traditional roles (Sec. 3). For the first time, independent contractors can be included in the definition of “employment” for PSLF purposes, provided their position couldn't legally be filled by a standard employee under state law. It also sets a clear standard for “full-time” work: an average of 30 hours per week. For nontenure track faculty, the Secretary of Education will define a factor to equate teaching load hours to the standard 30-hour work week, an area we’ll need to watch for clarity.

Finally, for those who consolidated their loans, the bill introduces a weighted average calculation for past payments (Sec. 6). This means when you roll multiple loans into a new Direct Consolidation Loan, the Secretary must look at the payments you made on each original loan and calculate an average based on the structure of those prior loans, ensuring you get maximum credit for your time served.