Editors note: The Biden Administration has made it clear that borrowers can contact or message their servicers to request a refund of any money paid toward their federal student loans between March 13, 2020, and August 28, 2023. August 28, 2023 appears to be the LAST DAY to request a refund for payments made on student loans during the pandemic. To be eligible for a refund, you must act before that date. Additionally, you can save a ton of money by subscribing to our weekly newsletter, which provides free updates.
Following the initial wave of the pandemic, a section of the CARES Act legislation initially suspended all federal student loan payments until September 30, 2020, and fixed interest rates at 200 percent of the total amount owed. The deadline for this benefit was repeatedly extended until August 30, 2023.
Federal borrowers can save money by either continuing to make monthly payments to effectively pay down their principal balance at a higher interest rate or by choosing not to pay back student loans.
You may be qualified for a student loan refund if, after March 13, 2020, you discovered that your financial situation had changed despite the fact that you were financially stable and had made student loan payments. If youre interested, request a refund before August 28, 2023. While rates are low and more cancellations are presumably on the way, receiving a refund can help you recoup some of your money.
Who got student loan refunds?
Only borrowers who requested refund checks got them. The refunds werent automatic.
Refunds were available for payments made on federal student loans during the pandemic pause; however, since the refunds have been reinstated and the general cancellation has been removed, the refunded amounts have been added back to the loan balances of the borrowers.
After the White House announced in 2022 that it would forgive up to $10,000 in federal student debt per borrower, or $20,000 if they were recipients of a need-based Pell Grant, refunds appeared especially appealing. Some borrowers preemptively requested a refund of payments that dropped their balances below the cancellation thresholds after taking advantage of the zero-interest payment pause to pay down their loan balance more quickly.
For instance, during the pause, a borrower with $12,000 in student debt in March 2020 paid $8,000 in full, leaving them with $4,000 in debt. They requested a $6,000 refund after learning about the cancellation plan, bringing their total to $10,000, the highest amount of debt cancellation for which they would be eligible.
Then a check for a refund was mailed by a federal student loan servicer.
However, as a result of the Supreme Court overturning President Joe Biden’s June decision to cancel student loans, borrowers are now responsible for the entire amount of their debt, even if it has been repaid in full.
They have not been eligible for payment refunds because private student loan payments were not covered by forbearance. Additionally ineligible were payments made on certain FFEL Program or Perkins loans.
Prepare to pay back your refund
The amount you owe has increased if you received a student loan refund check during the payment suspension because the refunded amount was added back to the principal of your loan. Interest began building on that amount on Sept. 1.
Those who relied on Biden’s student debt cancellation plan and paid off their entire student loan balance during forbearance but asked for a refund might be in for a surprise.
Take these two key steps as soon as possible:
- Locate your student loan servicer. You might not even be aware that your student loan management company has changed since forbearance started. Log into StudentAid to find your current servicer and view your balance. gov.
- Contact your servicer. Visit the website of your provider or contact them via phone. Update your contact information. Inquire about the amount of your payments, the date of your October first payment due, and the available student loan repayment plans. You will have to re-set any automatic payments that were in place prior to the forbearance.
Here are some repayment options to think about after you’ve spoken with your servicer and established how much you owe.
Make lump sum payments
Consider using the money you saved, if any, to make a one-time payment on the remaining balance on your student loans. With the use of this technique, you can eventually pay less in interest overall because you will owe less.
A lump sum payment should only be made if it won’t interfere with other urgent financial objectives, such as saving for retirement, building an emergency fund, paying your mortgage, or paying other bills.
Income-driven repayment plans can shrink payments
If making a lump sum payment is out of your price range, you might want to enroll in an income-driven repayment (IDR) plan. These plans forgive remaining debt after a predetermined number of years and cap your monthly expenses at a certain percentage of your disposable income. Your monthly expenses could be as little as $0, depending on your income. Additionally, if you make monthly payments under the new SAVE IDR plan, interest will not accrue on the balance of your student loans.
Contact your servicer to sign up for an IDR plan. Use the discretionary income calculator for student loans on NerdWallet to determine your estimated payments under both current and new IDR plans.
No impact on forgiveness under IDR, PSLF
Your progress toward IDR forgiveness, which happens after 20 to 25 years of monthly payments under current IDR plans, won’t be hampered if you received a refund check.
This is because the months that count toward IDR forgiveness are reevaluated as part of a one-time program known as the IDR account adjustment. Whether or not you made payments, the recount covers every month that there was a payment pause due to the pandemic.
The IDR account adjustment will completely erase the remaining student loan balance for borrowers who have been in any repayment plan for at least 20 to 25 years, while borrowers with more recent loans will get closer to the IDR forgiveness finish line. By the end of 2023, borrowers who qualify for forgiveness under the account adjustment will receive an email notification; by 2024, all other borrowers will receive notice.
Therefore, you might be free from your student debt, including the refunded amount, if you requested a refund and have been in repayment for at least 20 to 25 years. Pay off your student loans until you receive word that you are no longer in default.
This also applies if you’re pursuing Public Service Loan Forgiveness (PSLF), which requires you to make payments for ten years, or 120 months, before any remaining student loan balance is waived. As long as you fulfill additional requirements, such as having a job that qualified for PSLF at the time the payment was made, you will still receive PSLF credit for all refunded payments.
How to get a refund if the IDR account adjustment forgives your debt
It’s possible that you overpaid if you’re a long-term borrower and your loan balance is forgiven under the IDR account adjustment.
Most of the time, any overpayments made after 20 or 25 years will be refunded. The extra money paid on loans that are forgiven will be reimbursed to the most recent of these three dates:
- The day you paid 20 or 25 years’ worth of monthly bills, the minimum amount needed to be waived for IDR forgiveness.
- The date when the Department of Education acquired your loan.
- The disbursement date of your consolidation loan.
You won’t receive reimbursement for payments made prior to loan consolidation if you have already consolidated your debt. However, payments made prior to consolidation are still eligible for IDR forgiveness credit.
Refunds will be sent to you via the same payment method that you used initially. You will receive a refund check if you paid with a paper check; if you made an online payment using a bank account, the refund will be deposited back into that account.
If the IDR account adjustment erases your remaining loan balance, your servicer will let you know. After the loan is forgiven, you should anticipate receiving your refund in about two months if you are eligible.
FAQ
Why am I getting a student refund?
Money that your college directly deposits into your account is called a refund check. It is the remaining amount from your financial aid award that remains after you have paid for your tuition and any additional fees.
Why did i get a student loan refund check 2023?
If you have repaid loans for longer than 20 or 25 years, you may be eligible for immediate forgiveness of those debts. In the spring of 2023, borrowers who have made payments for IDR forgiveness for 20 or 25 years (240 or 300 months) may be eligible to have their loans forgiven.
Do I have to pay back the student loan refund?
During the payment suspension, if you received a refund for a student loan, the U S. government probably wants it back. Now that bills are due, you will be responsible for paying the full balance of your student loans, including the amount that has been refunded, along with interest.
Who gets the student loan forgiveness checks?
If you have been making loan payments for 20 or 25 years, you might be eligible for income-driven repayment (IDR) forgiveness. Your monthly payment under an IDR plan is determined by your family size and income.
Read More :
https://www.nerdwallet.com/article/loans/student-loans/refund-student-loan-payments