Introduction
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, mentions the Public Service Loan Forgiveness (PSLF) program only in passing. Nevertheless, other changes the law makes to the student loan program will have important impacts on PSLF, which forgives remaining student loan balances for borrowers who work full-time for qualifying public service employers.
PSLF is a program, popular in many quarters, with a troubled history. The cost of PSLF to taxpayers has grown dramatically over time, while its impact on public service employment is unclear. In the decade following its passage in 2007, educational trends and changes to other parts of the student loan program—including growth in borrowing under the Grad PLUS program and more generous Income-Driven Repayment (IDR) options—increased the potential cost of PSLF substantially. Yet as the program reached its tenth birthday, it had cost taxpayers little—and benefited few borrowers—because extreme administrative dysfunction prevented most eligible borrowers from accessing relief.
Biden-era reforms finally turned this around: Borrowers could receive retroactive credit for payments made on ineligible loans or while enrolled in a non-qualifying repayment plan, and the Department of Education (ED) made other changes to improve the administration of the program. Borrowers working full-time for eligible employers also received credit towards PSLF while payments were paused due to the COVID-19 pandemic, a policy initiated by the first Trump administration and continued for more than three years. These changes meant that hundreds of thousands of borrowers finally saw their loan balances forgiven under the program after 2022. By January of 2026, over 1.2 million borrowers had received $90.6 billion in forgiveness, corresponding to average relief of nearly $75,000 per borrower. PSLF is a substantial transfer from taxpayers to eligible borrowers, many of whom likely have graduate degrees and high income relative to the population or the typical borrower.
Despite these changes, the program was not yet on firm footing at the start of the second Trump administration. PSLF was not directly the subject of litigation, but the fallout related to legal action against Saving on a Valuable Education (SAVE), a Biden-era IDR plan, has made it difficult or impossible for otherwise-eligible public service workers to make PSLF-qualifying payments since the summer of 2024. The Biden administration offered—and the Trump administration has continued—a program that allows borrowers to “buy back” PSLF credit for periods of qualifying employment when they weren’t able to make payments, but this option is difficult to navigate and few applications have been approved or even processed. A lawsuit brought by the American Federation of Teachers (AFT) forced ED to resume processing IDR and PSLF paperwork, but the Department appears to have made little progress on the backlog. A court recently vacated all but one provision of the SAVE Rule, and OBBBA calls for the plan to be wound down by 2028. But the fallout of the litigation for PSLF borrowers will likely last years.
By changing the student loan repayment system, the higher education provisions of OBBBA will partially reverse the trend of rising PSLF generosity and cost. Whether the Department of Education can get the PSLF program back on track administratively amid significant reductions in staffing and a major transition of the student loan repayment system remains to be seen.
In this report, we discuss the purpose, origins, evolution, and status of the PSLF program leading up to the passage of OBBBA and how the new legislation is likely to reshape the program in the future.
How does the Public Service Loan Forgiveness program work?
The PSLF program was signed into law by President George W. Bush in 2007 as part of the College Cost Reduction and Access Act (CCRAA). The legislation attracted strong bipartisan support, passing the Senate 79-12 and the House 292-97, reflecting a broad political consensus to reward public service while addressing growing concerns about student debt burdens. Under PSLF, borrowers who make 120 qualifying monthly payments—the equivalent of 10 years—while working full-time for a government or nonprofit employer can have their remaining student loan balance forgiven.
PSLF uses a broad definition of public service
While rhetoric promoting PSLF often invokes public servants like teachers, firefighters, and social workers, eligibility is much broader. PSLF does not target specific occupations; anyone working full-time for a “qualifying employer,” defined as any U.S. government entity or 501(c)(3) nonprofit organization1 is eligible.2 This approach was a significant departure from previous, more targeted federal programs like or the , which were tied to specific, high-need occupations. By including all government and nonprofit workers, PSLF created a benefit potentially available to of the college-educated workforce, and because the value of PSLF scales with the amount borrowed, it may inadvertently encourage more borrowing.
Defining public service based on sector of employment remains controversial. This approach is practical to implement, since sector of employment is easier to verify than the specific services a worker provides. Why, though, should a nurse or medical assistant serving low-income patients at a nonprofit nursing home receive a loan subsidy while someone with the same qualifications serving the same population at a for-profit nursing home receives nothing? These concerns—and the limited evidence that PSLF has influenced decisions to enter or remain in the high-need professions discussed below—raise the question of whether policies that subsidize specific occupations more directly would be a more efficient and equitable way to support public service workers.
PSLF generosity depends on the generosity of available IDR plans
The PSLF program depends on the existence of income-driven repayment (IDR) plans, but PSLF and IDR are distinct policies with different purposes. The goals of IDR plans are to more closely match the timing of loan payments to earnings, which typically increase with experience, and protect borrowers who experience worse-than-expected earnings outcomes and struggle to afford their loan payments. The goal of PSLF is to encourage and support public service employment.
Borrowers who participate in IDR can make payments based on their income and have their remaining balance forgiven after a period of 20 to 30 years, depending on the IDR plan. For borrowers with eligible public service employment, PSLF shortens the time to forgiveness to 10 years. Prior to OBBBA implementation, borrowers could receive credit for payments they made while enrolled in either an IDR plan or the 10-Year Standard Plan (a fixed-payment repayment based on a fixed interest rate). However, a borrower making payments on the Standard Plan would pay off their full balance after 10 years even without PSLF.3 This meant that only those who participated in IDR—making lower payments based on their income—at some point during their first 10 years in repayment could benefit from PSLF because they would still have a balance to be forgiven after 10 years. After OBBBA is implemented, payments on the new Standard Plan, which will sometimes have a term longer than 10 years, will no longer count for PSLF, so borrowers seeking PSLF will need to be exclusively enrolled in IDR for 10 years.
IDR and PSLF are, thus, closely linked because IDR policy determines PSLF participants’ monthly payments: When IDR is more generous, monthly payments are lower, and the balance forgiven after 10 years will be larger. Borrowers with low initial earnings but higher earnings later in their career tend to benefit more from PSLF, compared to their counterparts with similar loan balances and flatter age-earnings profiles.
To illustrate this point, consider two borrowers who both enter repayment with $20,000 in undergraduate loans and have access to an IDR plan where the required payment is equal to 10% of income above 150% of the poverty line with remaining balances forgiven after 20 years.4 Borrower A has a flat earnings profile, with a starting salary of $40,000 that grows with inflation each year. Borrower B has a steep earnings profile, with a starting salary of $33,000 that grows 3% faster than inflation each year.
Figures 1 and 2 show the path of monthly payments and the loan balance in the Standard Plan and in IDR for Borrowers A and B, respectively; the values reported are in nominal terms, not adjusted for inflation.
In the Standard Plan (the light blue lines), both borrowers would make a fixed payment of about $210 per month for 10 years and pay off the loan in 10 years (so both the loan balance and the payment are $0 starting in year 11). For both borrowers, their monthly payments are initially lower if IDR is available, but they eventually repay the full balance within 15 years. That is, in the absence of PSLF, IDR spreads the payments out over a longer repayment horizon for both of these borrowers, but neither would benefit from IDR forgiveness.
If these borrowers qualify for PSLF, however, any remaining balance after 10 years will be forgiven; that amounts to $7,445 for Borrower A and $10,901 for Borrower B. Borrower B has a higher lifetime income than Borrower A, but Borrower B receives a larger PSLF subsidy because their income is lower during the first 10 years in repayment. Holding constant lifetime earnings, borrowers with low earnings early in the career and higher earnings later benefit more from PSLF.
More generally, these examples show how IDR and PSLF interact. The benefit of PSLF depends on how much a borrower needs to pay during the first 10 years in repayment—and how much more they would have paid after that if they did not qualify for PSLF. The available IDR plans changed several times after the introduction of PSLF in 2007, which affected the generosity and cost of PSLF. We return to this point below.
What are the effects of PSLF?
PSLF does not appear to increase public service employment
In theory, PSLF could influence both initial decisions to enter public service employment and persistence in those roles. To date, however, there is little direct evidence about the effects of PSLF on the number of borrowers working in the public and nonprofit sectors. The best available evidence comes from studies of loan forgiveness programs specific to teaching. A study of a federal program providing loan forgiveness to teachers in high-need schools after five years finds that neither program eligibility nor targeted information interventions affected teachers’ employment decisions, despite sizable loan balances among participants. The authors suggest that the complexity of the program and administrative barriers to accessing debt relief may be responsible for the lack of a response from teachers. A different loan forgiveness program in Florida designed to recruit and retain teachers in hard-to-staff subjects produced a modest reduction in teacher attrition. One effect that may become visible as more borrowers reach the 10-year threshold is “job lock,” where borrowers who otherwise might leave public service stay long enough to benefit from PSLF. Some may then exit from public service employment after receiving forgiveness. Data to test this hypothesis are only now becoming available.
PSLF creates incentives to increase tuition and borrowing
PSLF makes additional borrowing effectively free for borrowers who expect to receive forgiveness under the program since their loan payments will be based on income rather than the amount they borrowed. A 2014 report describes this as “zero marginal cost” borrowing. The report estimated, for example, that a social worker receiving a master’s degree in social work (MSW) who earned median wages for that occupation could expect to benefit from PSLF if they borrowed more than $17,500. For students who would borrow at least this much in the absence of PSLF, PSLF creates an incentive to borrow more (perhaps by attending a more expensive program) because all additional debt would be forgiven under PSLF. The availability of PSLF also weakens incentives for institutions to keep tuition down. But it is not just traditionally low-paying professions like social work and teaching where PSLF forgiveness could become common. Many who borrow for moderate- or even high-paying professions can benefit from PSLF if they have large loan balances and work in the government or nonprofit sectors.
Although the incentives are clear, direct evidence of the effects of PSLF on tuition or total borrowing is scant. One recent study finds evidence that higher loan limits for graduate borrowers lead to higher tuition and more borrowing in affected programs. While this study does not examine PSLF directly, the possibility of PSLF creates even stronger incentives to increase tuition in programs where many graduates expect to work for the government or nonprofit employers.
PSLF likely benefits higher-income and graduate borrowers disproportionately
Comprehensive data on the income of PSLF recipients is not available, so the distributional impact of the program is not clear. It is worth noting that PSLF was not designed to target low-income public service workers. Rather, it targets borrowers who have low income early in their career relative to their debt. The design of loan limits, with higher loan limits for graduate students compared to undergraduates, means that graduate students can benefit more from PSLF since they have larger loan balances to forgive.5
We draw on several data sources which together suggest that higher-income and graduate borrowers benefit disproportionately from PSLF. First, the Federal Student Aid (FSA) chief operating officer presented some data for those who received PSLF by October 2021 in testimony to Congress. This sample is small—about 19,000 borrowers—and may not be representative of the nearly 1.2 million who have received PSLF according to the most recent data. About 83% had at least some debt from graduate school, and more than 30% had income above $100,000 when they received PSLF.
Second, a recent study uses large-scale representative survey data to identify student loan borrowers who are potentially eligible for PSLF based on their sector of employment and time in the workforce, but these data do not include information on actual PSLF participation or forgiveness. The analysis shows that graduate degree holders are over-represented among those who are likely eligible for PSLF, accounting for 46% of likely PSLF eligibles compared to 27% of all student loan borrowers and 13% of the population ages 22-60 who are not enrolled in school. Graduate borrowers account for an even larger share of total loan balances—64%—that are likely eligible for PSLF relief.
Full-time public service workers are underrepresented in the bottom and top deciles of the income distribution, but those at the bottom of the income distribution tend not to have large student loan balances, so they do not benefit much from PSLF. By contrast, public service workers in the top decile hold a disproportionate amount of the debt eligible for forgiveness. The analysis suggests that PSLF benefits are concentrated among workers in the middle-to-upper portions of the income distribution, with over 55% of those estimated to be eligible for PSLF relief in the 6th to 8th deciles of the income distribution.
Finally, ED included some data showing the number of borrowers receiving PSLF and the average balance forgiven through September 2025 by subsector of employment as part of a recent rulemaking. We plot these data, along with the total balances forgiven, in Figures 3a through 3c.
K-12 education is by far the largest subsector, accounting for 303,500, or about 30%, of all borrowers benefiting from PSLF (Figure 3a). Health care and government each account for about 16%, and higher education for 12% of borrowers; social services and military each account for about 5%, with the remaining categories accounting for 2% (around 20,000 borrowers) or less. The average amount forgiven generally falls between $60,000 and $90,000 (Figure 3b). The legal subsector is a notable outlier at almost $110,000 per borrower, though few borrowers fall into this category (about 14,000). The high average balance forgiven, across subsectors, indicates that PSLF beneficiaries borrowed substantial amounts, most likely at least some of which was for graduate education. Figure 3c shows the total cumulative balances forgiven by subsector, calculated by multiplying the number of borrowers by the average balance. It follows roughly the same pattern as the number of borrowers in Figure 3a, though notably health care and legal account for a larger share of total balances forgiven than their share of total PSLF borrowers because of their high average balance forgiven.
Administrative data previously released by the Office of the Chief Economist at ED and analyzed here also showed that education is the most common sector of employment among borrowers who received forgiveness by November 2024, with K-12 schools representing 28% of all employers of PSLF beneficiaries. Institutions of higher education and health care nonprofits are the second and third most common subsectors at 15% and 12%, respectively. The survey data shows broadly similar results: The largest single occupational group potentially benefiting from PSLF is the teaching profession, representing over 24% of those potentially eligible for PSLF. The estimates suggest that about 60% of loan balances held by teachers are potentially eligible to be forgiven under PSLF.
Changes to other policies and educational trends have made PSLF more expensive over time
At the time of PSLF’s passage, Congress did not appear to expect it to have a significant budgetary impact, and CBO did not report the cost of PSLF separately in its published score.6 This turned out to be a substantial underestimate of the cost of the program, though the extraordinary administrative dysfunction described below meant that few eligible borrowers actually benefited in the program’s early years, masking PSLF’s true cost to the government for some time.
Several factors contributed to dramatically increasing estimates of the cost of PSLF in the decades since its passage. The initial estimates did not account for the possibility that borrowers would consolidate their FFEL loans (which are not eligible for PSLF) into Direct Loans (which are eligible). Further, the shift of the entire loan program to Direct Lending under the Affordable Care Act (2010) made all new borrowers PSLF-eligible, regardless of whether they consolidated their loans. Growth in enrollment and borrowing, especially following the Great Recession, were also much larger than expected. Increases in borrowing among graduate and professional students were particularly large, as the Grad PLUS program allowed them to borrow up to the full cost of attendance—with no aggregate limit. Grad PLUS was introduced shortly before PSLF, but the PSLF cost estimates did not anticipate how much PSLF-eligible workers would eventually borrow—and see forgiven—through Grad PLUS. Finally, a succession of more generous IDR plans reduced monthly payments during the first 10 years in repayment, increasing the balance remaining to be forgiven through PSLF after 10 years.
Although PSLF policy barely changed, the combined effect of these unanticipated trends and changes to other parts of the student loan program had staggering effects on the cost of PSLF: By 2015, CBO estimated that eliminating PSLF for new borrowers would save $11.5 billion over ten years.7 By 2017, that figure had nearly doubled to $23.7 billion; and by 2020, CBO estimated elimination would save more than $28.3 billion. Recognizing the escalating costs of PSLF, the Obama administration proposed capping the amount forgiven under PSLF at $57,500—the aggregate loan limit for independent undergraduate students—beginning with the FY 2015 budget. CBO initially scored the cap at just $265 million in savings over ten years, but revised that estimate to $6.7 billion over ten years by 2016, reflecting the rapid growth in projected forgiveness amounts. Congress did not act on Obama’s proposal to cap PSLF nor other proposals to eliminate PSLF entirely. OBBBA will partially reverse some of these trends, reducing the government’s PSLF cost for new borrowers through lower loan limits and changes to repayment plans even as the liability for existing borrowers remains substantial.
Eligible loan balances increased
How much students borrow directly affects the potential value of PSLF. After PSLF was introduced, two trends increased total PSLF-eligible student loan balances, which contributed to increasing costs associated with the program.
First, only Direct Loans are eligible for PSLF, although FFEL loans could become eligible if a borrower consolidated them into Direct Loans. At the time of PSLF’s passage, about 20% of new loan volume was through the Direct Loan program. As part of the Affordable Care Act (ACA) passed in 2010, Congress transitioned the student loan system entirely to Direct Loans; since 2010, all new loans are Direct Loans and therefore eligible for PSLF.
Second, policymakers appear not to have anticipated the increase in borrowing under the Grad PLUS program which was introduced shortly before PSLF and allowed students to borrow up to the full cost of attendance (tuition, fees, and living expenses) for graduate and professional programs with no aggregate limit. Grad PLUS was expected to raise revenue for the government, but policymakers did not anticipate the interaction with PSLF. Previously, graduate borrowing was capped at $20,500 annually with an aggregate limit of $138,500, with somewhat higher amounts for health professions. By contrast, loan limits for undergraduates are lower and have not been adjusted, even for inflation, since 2008. This contributed to a substantial increase in total graduate student loan borrowing and the share of all loans borrowed by graduate and professional students. Many workers with PSLF-qualifying employment pursue graduate degrees, and larger loan balances mean that even workers with relatively high incomes can benefit from PSLF.
Changes to IDR plans affected the value of PSLF for borrowers and the cost to taxpayers
PSLF depends on the existence of income-driven repayment plans, as discussed above. We explain the evolution of IDR plans prior to OBBBA in more detail here. Congress introduced a new IDR plan known as Income-Based Repayment (IBR) in the same legislation that created PSLF. Thus, following the launch of PSLF, borrowers had two income-driven repayment options: the Income Contingent Repayment (ICR) plan (first introduced in 1994) and the Income Based Repayment (IBR) plan (which became available in 2009). ICR was designed as a universal option available to all borrowers, including parents with PLUS loans, but required relatively high payments at 20% of income above the poverty line. IBR was more generous, requiring payments equal to 15% of income above 150% of the poverty line, a more attractive option than ICR for most borrowers with PSLF-eligible employment.
As student debt grew during the Great Recession, policymakers increasingly looked to IDR programs to provide relief for struggling borrowers. IDR plans can increase how much some borrowers ultimately repay if spreading payments out over a longer time reduces their chances of defaulting. However, this logic doesn’t apply to PSLF borrowers since PSLF cuts their time in repayment short. The Health Care and Education Reconciliation Act (HCERA) of 2010 specified a more generous version of IBR for new borrowers after July 2014, dropping the repayment rate to 10% and reducing the time before cancellation from 25 to 20 years.
Because many borrowers would not be eligible for the more generous terms of the revised IBR program, the Obama administration developed additional IDR plans using authorities in the Omnibus Budget Reconciliation Act of 1993 (OBRA93). The Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE) plans were introduced in 2012 and 2015, respectively. Monthly payments under these plans were generally similar to payments in the 2010 IBR program (“New IBR”) but available to more borrowers. REPAYE introduced two important changes: Payments are not capped at the payment under the Standard Plan, and the time before cancellation is 25 instead of 20 years for graduate borrowers. This means that borrowers with higher earnings later in their careers repay more under REPAYE than New IBR or PAYE.
The Biden administration modified REPAYE in 2023 through executive action, renaming the plan Saving on a Valuable Education (SAVE) and making it more generous, further increasing the combined cost of IDR and PSLF. Since the summer of 2024, legal action blocked further implementation of SAVE. A court recently vacated most of the SAVE rule, but it is not yet clear how ED will transition borrowers out of SAVE; in any case, under OBBBA, SAVE borrowers were scheduled to be transitioned to other plans before July of 2028.
Once OBBBA is fully implemented, SAVE/REPAYE, PAYE, and ICR will be phased out for all borrowers. New borrowers will have access to a single IDR option, the Repayment Assistance Plan (RAP), which is slated to become available in the summer of 2026. Some existing borrowers will also continue to have access to IBR, depending on when they borrowed. RAP will have monthly payments that are broadly similar to REPAYE for single borrowers, at least initially.8 The plan has a more generous treatment of uncovered interest and incorporates a new “principal subsidy,” which will benefit PSLF borrowers with steep earnings profiles. However, it requires all borrowers to make a minimum monthly payment of at least $10, and borrowers with outstanding balances will repay for 30 years before forgiveness, longer than in other plans.
For borrowers with low incomes relative to their loan balances, IDR reduces the monthly payment compared to the Standard Plan, but that is offset by a longer time in repayment. This means borrowers may still pay off most or all of their loans, especially if their earnings increase over time as in the examples shown in Figures 1 and 2 above. But PSLF cuts short the time in repayment so that lower payments earlier are not offset by a longer time in repayment.
The interactions between IDR and PSLF are complex. The total implicit subsidy that PSLF borrowers receive depends directly on their payments during the first 10 years, but the additional value of PSLF—on top of IDR—also depends on what they would have paid after the first 10 years in the absence of PSLF. In addition to the formula that determines monthly payments based on income and household size, three features of IDR policy affect how much borrowers in IDR eventually pay and, by extension, the value of early forgiveness under PSLF:
- How long do borrowers have to make qualifying payments before the remaining balance is forgiven? For pre-OBBBA IDR plans, the time to forgiveness ranged from 20 to 25 years for most borrowers; under the new RAP plan, that will be extended to 30 years.9 When the time to forgiveness is longer, borrowers participating in IDR repay more after the first 10 years, so early PSLF forgiveness is more valuable.
- Some IDR plans have implicit interest subsidies when the payment is not enough to cover interest. RAP goes a step further by providing a “principal subsidy” in some cases. These subsidies reduce what some borrowers eventually pay under IDR, which increases the value of IDR alone and therefore decreases the additional value of early PSLF forgiveness. The interest and principal subsidies implicitly “forgive” some debt (by not charging the interest or paying down some of the principal) even in the first 10 years, so there is less work for PSLF to do.
- Some plans cap monthly payments at what a borrower would have paid in the 10-year Standard Plan. A borrower whose income-based payment is above the cap will pay less in total if they are enrolled in an IDR plan that caps payments (IBR and PAYE) than one that does not (REPAYE, SAVE, RAP). This means that for borrowers whose income-based payment eventually rises above the cap, the additional value of PSLF is greater in plans that don’t cap payments. When payments after 10 years are higher, there is more benefit to early forgiveness.
To show how the value of PSLF varies depending on what IDR plans are available, we first calculate the implicit subsidy—relative to repaying the balance in full on the 10-year Standard Plan—assuming a hypothetical borrower participates in IDR and receives PSLF forgiveness after 10 years; we refer to this as the “total PSLF subsidy.” Then we calculate the implicit subsidy assuming they participate in IDR but not PSLF. We refer to this as the “IDR subsidy” and the difference between the total PSLF subsidy and the IDR subsidy as the “additional PSLF subsidy,” which is the additional subsidy a borrower participating in IDR gets if they are also eligible for PSLF.10
We note two limitations to this approach. First, these calculations do not account for the tax treatment of student loan forgiveness: Under current law, balances discharged under IDR are considered taxable income, while PSLF discharges are not. This means that the additional value of PSLF relative to IDR alone is understated by this method.11 Second, this approach does not account for the cost of having a student loan balance, even if the payment is small or even zero: For example, student loan balances appear on credit reports, borrowers must complete annual paperwork to continue participating in IDR, and they face some risk of default as long as they have an outstanding balance. These costs to borrowers are difficult to measure, but they are certainly not zero; therefore, the estimates here, which only account for the direct financial savings associated with PSLF, underestimate the total value to borrowers at least somewhat.
Figure 4 shows the IDR, additional PSLF, and total PSLF subsidies for two hypothetical borrowers enrolled in different IDR plans.
The first panel is for a single borrower with $20,000 in undergraduate debt and annual income starting at $33,000, increasing 3% more than inflation each year (the same as Borrower B above). The second panel shows the results for a hypothetical public interest lawyer with an initial loan balance of $120,000 and initial income of $70,000, increasing 2% more than inflation each year.12
We first walk through the results for the undergraduate borrower, who has a low initial salary but gets substantial raises each year. Under “Old IBR,” the plan that was available at the time PSLF was introduced, this borrower would make lower payments early and higher payments as their income increased and ultimately repay their balance in full. They would not benefit from an IDR subsidy (there is no dark blue bar). However, if they are eligible for PSLF, they only make payments for 10 years, so they benefit from a PSLF subsidy of about $2,500 (the light blue bar), around 13% of the initial balance.
Payments would be lower in New IBR and REPAYE (10% rather than 15% of discretionary income). Still, this borrower would not benefit from an IDR subsidy in New IBR or REPAYE, though they would spend more time in repayment compared to Old IBR. That is, this borrower would repay their loan in full in the first three plans, unless they qualify for PSLF.13 If this borrower qualified for PSLF, they would benefit from a subsidy of more than $6,600 if enrolled in New IBR or REPAYE. This is larger than for Old IBR because the monthly payments would be lower during the first 10 years in repayment—and PSLF cuts short the time in repayment, so there is not time to make up for the low initial payments.
Under SAVE, payments for undergraduate borrowers are just 5% of discretionary income, and the income protection threshold is higher than for earlier plans. So the monthly payments for this borrower would be significantly lower in SAVE; the IDR subsidy would be almost $13,800. The total PSLF subsidy would be $18,300, more than 90% of the value of the loan. For this borrower, the additional PSLF subsidy would be smaller in SAVE than in New IBR and REPAYE but larger than under Old IBR, demonstrating the complex relationship between IDR generosity and the additional value of PSLF.
More generous IDR reduces what PSLF borrowers pay during the 10 years before forgiveness, but it may also reduce what they would have paid later if not for PSLF. This means that an increase in generosity of IDR can increase or decrease the additional value of PSLF. In an extreme case where IDR is sufficiently generous that a borrower never makes payments, the added value of PSLF would be zero according to these calculations. However, as noted above, there are likely some benefits to eliminating the balance even if the borrower wouldn’t be making payments, which is not captured by these calculations.
Finally, although monthly payments are broadly similar in RAP and REPAYE or New IBR, the undergraduate borrower shown in the first panel would get a small IDR subsidy in RAP because they would benefit from the principal subsidy for the first few years in repayment. In this example, the total PSLF subsidy in RAP would be slightly larger than in REPAYE ($7,200 instead of $6,600). However, for REPAYE the full $6,600 subsidy is attributable to PSLF, whereas the portion of the subsidy attributable to PSLF (the “additional PSLF subsidy”) is slightly smaller in RAP ($5,500) because this borrower would have received some IDR subsidy in the absence of PSLF. That is, a larger share of the subsidy for this borrower is attributable to PSLF rather than IDR in REPAYE, but the total subsidy received is slightly larger in RAP.
The second panel shows that the public interest lawyer receives substantial IDR subsidies in all the plans other than Old IBR. The additional value of PSLF is highest in Old IBR, though the combined IDR/PSLF subsidy is still lowest. For the undergraduate borrower, the IDR subsidies in REPAYE and New IBR are nearly identical, but for this borrower, the REPAYE IDR subsidy is smaller—and the additional PSLF subsidy larger—compared to New IBR. This is because payments are capped at the payment under the Standard Plan in the IBR plans but not in REPAYE; this cap was not binding for the undergraduate borrower, but it is for the public interest lawyer. In addition, REPAYE requires 25 years in repayment for graduate students, compared to 20 in New IBR. Together these differences mean that this graduate borrower would pay more later in their career in REPAYE compared to New IBR, reducing the value of the IDR subsidy and increasing the additional value of PSLF. The difference between SAVE and REPAYE is not as large in the second panel as the first. This is because, relative to REPAYE, SAVE reduced payments for undergraduate borrowers much more than for graduate borrowers.
It is also notable that the public interest lawyer would not have been able to accumulate a balance of $120,000 prior to the introduction of the Grad PLUS program, illustrating that IDR generosity and borrowing limits interact to affect the cost of PSLF. In the presence of tighter loan limits, federal student loan balances will be lower, and the potential benefit to borrowers and cost to taxpayers for both IDR and PSLF will be smaller. The examples above show how higher loan limits and the increased generosity of IDR over time unambiguously increased the cost of IDR and PSLF together (the total PSLF subsidy). However, the relationship between these factors and the additional PSLF subsidy—on top of IDR—is more complex.
The PSLF program has suffered from serious administrative problems
While the basic structure of PSLF is straightforward and generous to qualifying borrowers, the implementation and administration of the program has been challenging for the Department of Education, loan servicers, and borrowers. The program was poorly administered in its early years, and borrowers often did not understand its requirements. This meant that many potentially eligible borrowers initially did not receive credit towards PSLF, which temporarily blunted the effects of the changes to IDR and loan limits described above on program costs.
To get PSLF, borrowers need to successfully navigate both IDR and PSLF paperwork, both of which have proven difficult. In addition to potential confusion created by the IDR rules, the PSLF program has imposed significant administrative burdens on borrowers because they not only need to make “qualifying payments” but also file Employment Certification Forms (ECFs) from qualifying employers. The ECF was not introduced until years after PSLF was created, making it impossible for borrowers to know what information would be necessary to verify their public service employment or track their progress towards forgiveness. Until recently, the Employment Certification forms had to be transmitted by fax or in the mail and required physical (“wet”) signatures from employers. This process can be particularly challenging for borrowers with multiple qualifying employers, as each required separate certification, or borrowers whose prior employers had closed down. Additionally, the program operated under a “specialty servicing” model where PSLF accounts were managed by a single designated servicer, separate from borrowers’ regular loan servicers. This meant that accounts had to be transferred between servicers, which confused borrowers and sometimes resulted in lost payment history.
The problems with PSLF administration became clearer after 10 years passed—the time required to earn forgiveness through the program—and exceedingly few borrowers had qualified. In the first year borrowers could theoretically receive forgiveness (2017), only 96 did. The extraordinarily low approval rates—with rejection rates exceeding 95%—highlighted severe administrative problems that plagued the program from its inception.
ED has implemented changes to improve PSLF administration
Recognizing the challenges of the cumbersome PSLF certification processes, the Federal Student Aid (FSA) office implemented changes aimed at improving the borrower experience. FSA launched the PSLF Help Tool in December 2018 to help borrowers figure out if they were eligible for the program and generate employment verification documents, but those documents still could not be signed or submitted electronically. In November 2020, an updated tool provided a more intuitive interface, and the employment certification and PSLF application were combined in one form. The most significant changes came in April 2023 when FSA transitioned to a fully digital process. Under this system, borrowers can sign and submit their PSLF Form digitally through StudentAid.gov and send requests to employers for e-signature using DocuSign.
The Department also attempted to reduce confusion around PSLF administration by consolidating management of the program with designated servicers, but this created additional complications. After one servicer, FedLoan Servicing exited, PSLF accounts were transferred to MOHELA, which became the sole PSLF servicer during the transition. The handoff was accompanied by processing delays and problems with missing or unavailable borrower account information. In 2024, the Department shifted PSLF management from a specialty servicer to StudentAid.gov. Assessing the overall effectiveness of these changes is difficult: Although the digital transition has streamlined applications and employer verification, implementation challenges have persisted, and the broader student loan system has also been disrupted by litigation over the SAVE plan.
“Waivers” gave some borrowers retroactive credit towards PSLF
The changes above may have helped improve the administration of PSLF going forward, but other policies were needed to address missed credit in the past. In 2018, Congress passed the Temporary Expanded Public Service Loan Forgiveness (TEPSLF) program as part of the Consolidated Appropriations Act. TEPSLF was designed to provide a second chance for borrowers who had been denied PSLF because they were in the wrong repayment plan; the program retroactively made payments under the graduated or extended repayment plans eligible for PSLF credit. However, TEPSLF had significant limitations that continued to restrict access. The program had a limited budget, with funding distributed on a first-come, first-served basis. While TEPSLF provided some additional pathways to forgiveness, it did not resolve the fundamental problems that prevented public service workers from utilizing the program.
Recognizing that the 2018 TEPSLF effort was insufficient to address the problems discussed above, the Biden administration announced a limited PSLF waiver in October 2021. This waiver restructured PSLF eligibility requirements more fundamentally than did TEPSLF and was designed to provide retroactive fixes for the administrative failures that had prevented eligible borrowers from accessing benefits since the program’s inception in 2007. ED explicitly recognized that poor implementation had created barriers that went far beyond individual borrower mistakes, necessitating broad policy changes to restore the program’s intended function. To benefit from the waiver, borrowers had to submit information before October 31, 2022. The Department of Education continued to process PSLF submissions under the waiver through the end of the Biden administration. If borrowers met the qualifying employer provisions, the waiver gave them retroactive PSLF credit by loosening several restrictions so that more payments would qualify:
- Loan type eligibility. Prior to 2010, many student loans were issued by private lenders with government guarantees under the FFEL program, but only Direct Loans qualify for PSLF. Borrowers could convert their FFEL loans to Direct Loans by consolidating, making them PSLF eligible. Only about 20% of loans originated in 2008 were Direct Loans, so for the cohorts borrowing between 2007 and 2010, about 80% of loans would have required consolidation to be eligible for PSLF. Under the waiver, borrowers could retroactively receive credit for payments they made on FFEL loans before they were consolidated into Direct Loans.
- Qualifying repayment plans requirements. Borrowers received retroactive credit for PSLF payments they made while enrolled in a graduated or extended payment plan.
- Late and partial payments. The waiver allowed borrowers to get credit for late and partial payments.
- Credit for periods in forbearance. Because loan servicers often placed struggling borrowers in forbearance (where they accumulate interest and do not get credit towards IDR or PSLF forgiveness) rather than into an IDR repayment plan for which they qualified and could receive PSLF credit, the waiver allowed borrowers to count some time in forbearance towards PSLF.14
- Eligible employment. The waiver allowed borrowers to count periods when they were pursuing Teacher Loan Forgiveness and PSLF concurrently. In addition, borrowers could receive PSLF if they had previously made 120 payments while working for a qualifying employer but were not employed with a qualifying employer at the time of their PSLF application.
Many borrowers have now benefited from PSLF
The improvements to PSLF administration, the limited PSLF waiver, IDR payment count adjustments, and the extended COVID-19 payment pause, during which borrowers with qualifying employment received credit towards PSLF relief even though they weren’t making payments, all contributed to substantial increases in PSLF after 2022. But by 2024, litigation against SAVE once again introduced significant complications, freezing IDR and PSLF applications for months at a time and introducing new challenges for the PSLF program.
Figure 5 shows trends in the cumulative number of borrowers benefiting from PSLF, and Figure 6 shows the total cumulative balances forgiven. Before ED started forgiving balances under the limited waiver in late 2021, fewer than 20,000 borrowers had benefited from PSLF. The number of borrowers who received forgiveness under the limited PSLF waiver (the light blue bars) increased steadily after that, driving most of the increase in forgiveness through 2023 and reaching its peak of about 760,000 at the end of the Biden administration. Fewer than 8,000 borrowers ever benefited from TEPSLF.
The number of borrowers receiving forgiveness under “traditional PSLF” (not TEPSLF or the limited PSLF Waiver) increased substantially between summer 2023 and the end of 2024, growing from around 16,000 to 312,000 borrowers.15 Much of this growth was due to borrowers receiving IDR credit through the one-time Income-Driven Repayment Account Adjustment. Like PSLF, IDR programs suffered from administrative problems that prevented borrowers from getting credits, and the IDR Account Adjustment gave borrowers retroactive credit toward IDR loan forgiveness for periods that were previously not counted. For many borrowers with qualifying public service employment, the IDR adjustment provided the 120 qualifying payments needed to receive forgiveness under PSLF.
The most recent available data (January of 2026) show that more than 1.2 million borrowers have benefited from PSLF, with forgiven balances totaling almost $91 billion. About 60% of all PSLF recipients benefited from the Biden-era limited PSLF waiver (the light blue color), about 39% benefited from traditional PSLF without the waiver (the dark blue bar), and less than 1% (just 7,900 borrowers) from TEPSLF (the orange bar). Figure 6, which shows trends in cumulative balances forgiven under PSLF, follows a similar pattern as trends in Figure 5. In the most recent data, cumulative balances forgiven topped $90 billion.
PSLF continues to face serious administrative challenges
While the changes described above have reduced administrative burdens associated with PSLF participation, they have not been eliminated. What’s more, the litigation against the SAVE IDR plan introduced new complications for the administration of PSLF that are likely to have an impact for years to come.
Because of the lawsuit, brought by several Republican Attorneys General, borrowers who had signed up for SAVE were forced into administrative forbearance starting in the summer of 2024. Initially, no payments were due and interest did not accrue, so this may have been a welcome, if potentially confusing, development for many borrowers; ED started charging interest again in August of 2025. However, to get PSLF credit, borrowers generally need to make payments while they are employed full-time for a qualifying employer; but borrowers enrolled in SAVE could not make a payment on that plan. (The pandemic payment pause was an exception: Borrowers working for qualifying employers received PSLF credit while in interest-free forbearance even if they weren’t making payments during the pause.) Some PSLF borrowers could qualify for another IDR plan, but usually that would involve a higher payment. And because of the litigation, the IDR application has sometimes been unavailable and/or application processing was paused since the summer of 2024, so switching to another plan was often not possible in practice.
ED announced a “PSLF buyback” provision, which allows borrowers to make payments retroactively for periods when they had qualifying employment but could not make payments because of the SAVE litigation, but the program presents several problems for PSLF borrowers. First, the program only allows a borrower to “buy back” payments if those payments will bring them to 120 qualifying payments and qualify them for PSLF. A borrower who is halfway to forgiveness would need to wait five years to apply to buy back payments; and while the Trump administration indicated they will continue the policy, it is not clear for how long. Second, because of the legal uncertainty, servicers reportedly cannot calculate how much some borrowers need to pay. Finally, ED has been slow to process Buyback applications: As of December 31, 2025, ED has a backlog of 83,370 PSLF Buyback applications and historically has processed fewer than 2,000 applications each month.
In March of 2025, the American Federation of Teachers (AFT) sued ED over its failure to process IDR and PSLF applications for forgiveness, among other issues. In a negotiated settlement, ED agreed to reopen some IDR plans and speed up processing of PSLF buyback, PSLF, and IDR applications. ED does seem to have picked up the pace, but the backlog has still increased since the settlement and AFT was recently back in court asking for further relief. Overall, the PSLF forgiveness process remains difficult and confusing for borrowers to navigate.
How will the One Big Beautiful Bill Act (OBBBA) impact the PSLF program?
Two key changes to the student loan program included in the OBBBA legislation will impact the PSLF program: the elimination of the Grad PLUS program, which will significantly reduce how much graduate and professional students can borrow, and the overhaul of repayment options.
Reducing how much graduate and professional students can borrow has a straightforward effect on loan forgiveness programs such as PSLF: Borrowers who are constrained by the limits will borrow less from the federal government and have a smaller balance eligible for forgiveness. As discussed above, borrowers can only benefit from PSLF if they participate in IDR at least some of the time, and borrowers generally only benefit from participating in IDR if their loan balance is high relative to their income. By reducing federal loan balances and, in turn, the standard payment, the new limits will reduce how many borrowers participate in IDR and PSLF at all. This also means that fewer borrowers will experience “zero marginal cost borrowing,” where they expect to receive forgiveness so face no additional cost to borrowing more, as described above.
Estimates suggest that a quarter to a third of graduate borrowers currently borrow above the new limits, but we do not know how many newly constrained borrowers have PSLF-qualifying employment. On the one hand, to the extent that Congress intended to provide a large subsidy to public service workers through PSLF, the loan limits reduce that. On the other hand, it is not clear Congress anticipated the growth in graduate borrowing or the cost of the PSLF program. If borrowers turn to the private student loan market to make up the difference, they will not have as much protection against financial distress if their income is lower than expected. However, this is primarily a question for the design of IDR plans, one purpose of which is to provide this type of insurance, rather than PSLF, which is designed to subsidize public service workers.
Above we discussed how PSLF and IDR interact, and how OBBBA made important changes to available IDR plans. The legislation specifies a single new IDR plan known as Repayment Assistance Plan (RAP) for new borrowers starting in July 2026. It also specifies a tiered Standard Plan, with a longer horizon for borrowers with larger initial balances, and makes payments made while in the Standard Plan ineligible for credit towards PSLF and IDR forgiveness. Some existing borrowers will have access to IBR, depending on their circumstances. All borrowers except those with Parent PLUS loans will have access to RAP. REPAYE/SAVE, PAYE, and ICR will be shut down, so borrowers enrolled in those plans will need to transition to a new plan.
Overall, monthly payments for a single borrower in RAP are roughly similar to those in REPAYE, with somewhat higher payments for both very low-income and high-income borrowers. Pre-RAP IDR plans calculated monthly payments as a fixed percentage (the “payment rate”), ranging from 5% for undergraduates in SAVE to 20% in ICR, above an income protection threshold (ranging from 100% of the poverty line in ICR to 225% in SAVE). Under RAP, payments for single borrowers are $10 per month for borrowers with incomes up to $10,000, 1% of income for borrowers with income between $10,000 and $20,000, 2% of income for those with income between $20,000 and $30,000, increasing by 1 percentage point for each additional $10,000 in income, capping out at 10% for borrowers with incomes over $100,000.16 Some key differences between RAP and earlier plans will affect different borrowers differently:
- In pre-RAP plans, the income protection threshold is tied to the poverty line, which depends on household size, so monthly payments are lower for borrowers in larger households. In RAP, the monthly payment does not depend on household size but instead is reduced by $50 for each dependent child.
- The treatment of uncovered interest17 became more generous in successive IDR plans. In REPAYE half of uncovered interest is forgiven, and in SAVE that was increased to 100% so that loan balances never increase if a borrower is enrolled in SAVE. RAP goes further by applying the first $50 of any on-time monthly payment to principal and forgiving any remaining uncovered interest. This “principal subsidy” ensures that the loan balance declines by the monthly payment, up to $50.
- The formula to calculate payments in earlier IDR plans is automatically adjusted for inflation because the poverty line is adjusted for inflation. The RAP formula, on the other hand, is not scheduled to be adjusted for inflation. This means that the plan will become less generous over time. For example, if inflation were 3% for the next 10 years, the 10% repayment rate would kick in for borrowers above the equivalent of about $75,000 today (instead of $100,000) and the value of the principal subsidy would be up to about $37 (instead of $50).
The combined effects of the new loan limits and new IDR plans are complex but will certainly be substantial. In Figures 7 and 8, we illustrate how these changes will affect the subsidy that several hypothetical borrowers receive. For Figure 7, we estimate the total value of PSLF as above in Figure 4, but we do not show the IDR and additional PSLF subsidies separately. We reduce the number of IDR plans we report on for simplicity.
Figure 7 shows the value of the PSLF subsidy for a hypothetical physician with an initial balance of $300,000 who spends six years in residency and fellowships earning a modest salary, then earns $350,000, growing at 3% faster than inflation, starting in the seventh year in repayment.18 Under OBBBA, this borrower would only be allowed to borrow $200,000 from the federal student loan program. The figure shows the value of the subsidy across IDR plans, with and without the OBBBA limits in place.
The implicit subsidy is much lower when the loan limits are in place (the light blue bars) across all of the IDR plans. This is a straightforward result of the fact that the initial loan balance was smaller, so there is less to forgive. In both the current policy (dark blue) and OBBBA limit scenarios, the implicit PSLF subsidies are similar—and quite large, both compared to the size of the loan and compared to implicit subsidies for many lower-income borrowers—across IDR plans. The borrower only repays between about 36% and 62% of what they borrowed.19 This is because, in this example, the physician’s income is low relative to the loan balance during the first 10 years, and PSLF cuts the time in repayment short.
Figure 8 illustrates how having a spouse and dependent children affects the value of the PSLF subsidy for two borrowers who will be unaffected by the loan limits. RAP accounts for household size and dependents differently than earlier plans. The poverty line varies with household size, so any additional household member—adult or dependent—increases the income protection threshold, reducing payments for borrowers in pre-RAP plans. In RAP, only dependent children affect the payment. The first panel shows the results for Undergraduate Borrower B, and the second panel shows the results for the public interest lawyer.20
The dark blue bars show the subsidy if the borrower is single, and the light blue shows the subsidy for the same borrower with a spouse and two dependent children. For this exercise, we assume the spouse does not have earnings and report the total PSLF subsidy.
The PSLF subsidy is larger across all IDR plans for borrowers with a spouse and children (the light blue bars) than without (the dark blue). The subsidy is largest in SAVE, compared to earlier plans, except for the married undergraduate borrower with two children, who benefits from a subsidy equal to the full value of the loan in all of the plans other than RAP. Having a larger household generally increases the generosity of IDR more for the pre-RAP plans. In the married-with-kids scenario, Undergraduate Borrower B’s income is below the protected income threshold for all of the pre-RAP plans, so they always have a zero payment and the subsidy is equal to the full value of the loan. In RAP, the subsidy is still substantial at $15,800. If Borrower B is single, on the other hand, the subsidy in RAP is slightly larger than in REPAYE because for the first several years this borrower’s income is in the range where payments in RAP are lower than in REPAYE. In SAVE, the additional subsidy when the borrower has a larger household is much smaller because the subsidy when single is already nearly the full value of the loan at $18,300.
The proportional change in subsidy in the married-with-dependents scenario is smaller for the public interest lawyer, but again the additional subsidy if the borrower has a family is smallest in RAP.
It is worth noting that, even for the physician facing OBBBA loan limits, the value of the PSLF subsidy is an order of magnitude larger than for the undergraduate borrower. This is a straightforward implication of subsidizing public service through loan forgiveness: Those who borrow more can benefit more from forgiveness.
These three examples are far from exhaustive but illustrate the range of effects the changes in OBBBA will have on PSLF borrowers. Although the effects on particular borrowers can be difficult to predict without simulating payments over a borrower’s career, overall, the changes in OBBBA—especially the new loan limits—will reduce the generosity and cost of PSLF relative to current law.
Summary
For all of the legislative, executive, and judicial action surrounding federal student loans over the past two decades, the core structure of the PSLF program has remained largely unchanged since its creation in 2007, including in the recent OBBBA legislation. Yet the close coupling of PSLF with income-driven repayment plans and loan limits has dramatically transformed the program’s generosity—and its cost—even though PSLF itself has not been modified. The introduction of more generous IDR plans, the expansion of Grad PLUS, and the extended COVID-era payment pause together increased both the value of PSLF to qualifying borrowers and its cost to taxpayers far beyond what was anticipated when the program was created. By January 2026, over 1.2 million borrowers had received PSLF, with discharged balances totaling almost $91 billion—an average of nearly $75,000 per borrower. The majority of these discharges were facilitated by Biden-era reforms, particularly the limited PSLF waiver, which gave retroactive PSLF credit to borrowers who had been denied forgiveness due to earlier administrative dysfunction. Moving forward, the combined changes in OBBBA—especially the elimination of Grad PLUS and transition to RAP—will reduce the combined generosity of PSLF and IDR for future borrowers, partially reversing the upward trajectory in program costs.
Policy shifts in the federal student loan system create costs not only for borrowers but also for postsecondary institutions that need to align student demand and funding options. The administrative complexity of the PSLF program—with its requirements for qualifying employment certification, enrollment in specific repayment plans, and navigation of servicer transitions—has consistently favored well-informed, strategically-advised borrowers over those with fewer resources. The recent SAVE litigation has only amplified these burdens, creating backlogs that peaked at approximately two million IDR applications and left over 83,000 PSLF-eligible borrowers awaiting buyback decisions even after completing 10 years of qualifying employment. Borrowers currently in repayment face interest accumulation, processing delays, and the burden of excess payments while awaiting forgiveness decisions. And those who have completed 10 years of public service may find themselves unable to change employers or make major financial decisions until their applications are processed.
A fundamental problem with PSLF is that the program’s designers never fully considered how its provisions interact with other programs and the incentives the program creates for borrowers and postsecondary institutions. The inclusion of Grad PLUS loans as eligible for both IDR and PSLF meant that the marginal cost of additional borrowing is effectively zero for borrowers expecting forgiveness, weakening incentives for both students and institutions to restrain costs and borrowing. The distributional effects of PSLF may also be less progressive than intended: The largest subsidies flow to borrowers with large loan balances and steep earnings trajectories, such as physicians. By reintroducing loan limits for graduate borrowers, OBBBA will moderate this problem.
Despite some progress since 2018, the administration of PSLF is still far from smooth, limiting the program’s effectiveness in promoting public service employment and providing relief for eligible borrowers. Unwinding the effects of the litigation against the SAVE plan on PSLF will be difficult for an understaffed FSA that is also tasked with transitioning the entire repayment system after OBBBA. This type of administrative dysfunction not only limits the effectiveness of the program but also likely undermines public confidence in the student loan program and the federal government more broadly.
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