How to Get Your Student Loan Payments Refunded

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On Aug. 24, 2022, President Joe Biden announced the administration’s plan for broad federal student loan forgiveness. Eligible borrowers can receive up to $10,000 in debt relief, plus an additional $10,000 for Pell Grant recipients. While this news likely came as a relief for many, it may have been a frustrating announcement for anyone who paid off some or all of their student debt during the COVID-19 payment pause. If you’re one of these borrowers, the goods news is that you might be eligible for a refund, even if you paid off your entire balance during the pause.

Key Takeaways

  • As part of President Biden’s student loan forgiveness plan, borrowers will be able to receive up to $20,000 in student loan relief, so long as their annual earnings are no greater than $125,000 ($250,000 for married couples).
  • Roughly 9.1 million borrowers made at least one student loan payment between April 2020 and March 2022. Of that number, approximately 1.9 million paid off all of their debt.
  • Borrowers who paid off part of their student debt during the pandemic pause may receive a refund automatically, while borrowers who paid off their entire balance will have to request one from their loan servicer.

Did You Make Payments During the Pause?

Back in March 2020, the United States Department of Education announced a pause on federal student loan payments and set interest rates to 0%. For roughly two and a half years, borrowers didn’t have to pay down their student debt balance, even if they were delinquent, in default, or otherwise behind on payments. The Education Department also stopped collections on defaulted loans.

Some borrowers opted to continue making payments, taking advantage of the 0% interest rate to get ahead on paying down their principal balance before the pause ended. According to Federal Student Aid, approximately 9.1 million borrowers made at least one student loan payment between April 2020 and March 2022, with roughly 1.9 million having entirely paid off their debt.

If you only paid off part of your debt, and if your voluntary payments during the pause brought your balance below the maximum debt relief amount that you’re eligible for, then you will automatically receive a refund to make up the difference. For example, let’s say you had a student debt balance of $10,500 prior to March 13, 2020, and paid off $1,000 since then. If you’re eligible for $10,000 in relief, then the Education Department will forgive your remaining $9,500 balance and give you a $500 refund. However, if you paid off your entire balance, your refund won’t be distributed automatically. Fortunately, it’s still possible for you to get one, you’ll just have to put in a little extra work.

How to Get Your Refund

If you paid off your entire student loan balance on or after March 13, 2020, you can contact your loan servicer to request a refund on any qualifying payments, so long as they were for one or more of the following types of loans that are eligible for student loan forgiveness:

  • All direct loans (subsidized, unsubsidized, PLUS, consolidation), even if you’ve defaulted
  • All Federal Family Education Loan (FFEL) Program loans held by the Education Department
  • All federal Perkins loans held by the Education Department
  • Defaulted FFEL Program loans not held by the Education Department
  • Defaulted Health Education Assistance Loans (HEALs)

The following loans are ineligible for student loan forgiveness, meaning they are also ineligible for a refund:

  • Private student loans
  • HEALs that aren’t defaulted
  • Federal Perkins loans that aren’t managed by the Education Department (whether they’re defaulted or not)
  • FFEL Program loans that aren’t defaulted and not managed by the education department

Source: Federal Student Aid

Do I Need to Request a Refund?

While you aren’t required to request a refund, you should seriously consider doing so if you paid off your debt balance during the pandemic pause. Requesting a refund and getting your money back could help you pay down other debt, save for a big purchase (like a home or car), or save for an emergency.

But not everyone needs to or should request a refund. For instance, those who have ineligible loans shouldn’t bother requesting one. Additionally, those that have made significant headway on repaying loans that don’t qualify for forgiveness may not want to request a refund.

Do I Qualify for Forgiveness?

The new plan outlined by President Biden will forgive up to $20,000 in student loan debt for Pell Grant recipients. In order to qualify, your annual earnings must be no greater than $125,000 ($250,000 for married couples). Non-Pell Grant recipients who meet this same eligibility requirement could receive up to $10,000 in debt relief.

Are All Student Loans Forgiven?

Nearly every type of federal student loan qualifies for forgiveness, including all direct loans, all FFEL Program loans held by the Education Department, defaulted FFEL Program loans not held by the Education Department, Federal Perkins Loans held by the Education Department, and defaulted HEAL loans. However, in addition to private student loans, all Federal Perkins Loans not held by the Education Department, FFEL Program loans not held by the Education Department, and HEAL loans are ineligible for debt relief.

The Bottom Line

When you receive your refund depends on your loan servicer. Some will credit an amount back to you within a few days, while others might issue a check that won’t arrive for a few weeks. While it’s a good idea to stay on top of your loan servicer to ensure you get your money back, don’t be surprised if you don’t see it right away.

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