How to Get Your Student Loan Payments Refunded

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.

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}

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.