This single mother got a $9,000 refund on her student loans. You can too, but you’ll have to ask
Dyana King gets a $9,000 refund on her student loans.
All she had to do was ask her refund agent for the money.
“Contacting my loan officer took over an hour, but once online it was a super easy process,” says King, who is eligible for up to $10,000 in student loan forgiveness under of Biden’s new plan. “She calculated how much I had paid and said it would take 6-8 weeks to receive my check.”
King, a 30-year-old single mother with two children and financial coach, is one of many student borrowers eligible to receive a refund on any payment made during the break on federal student loans. And while the option to make that request isn’t necessarily new, it’s become particularly relevant now that most borrowers have the help of President Joe Biden. new loan cancellation plan. This includes borrowers who repaid their student loans during the break (which began March 13, 2020).
Biden said last week he would eliminate $10,000 in federal student loan debt for borrowers who earn less than $125,000 a year. On top of that, he promises to erase up to $20,000 in debt for those who borrowed money through the Pell Grant program, which primarily targets students and low-income families. The pause on federal loan repayments has been extended until the end of the year.
How to Get a Refund on Federal Student Loan Payments
About 500,000 people – nearly 1% of all borrowers – continued to repay their federal student loans during the pandemic because, with interest also suspended, they had the means to reduce their debts faster, according to the expert in Higher Education Mark Kantrowitz.
But with the announcement of student loan cancellationmany of these same people who qualify for the rebate want their payments refunded.
“2020 was the year I tackled my student loans intensively and actually paid them off in November 2020,” King says. “When the president announced the $10,000 waiver, I thought, ‘Hm, can I get a refund and qualify?'”
To obtain a refund on any payment made since March 13, 2020, borrowers should contact their loan officer. Expect long phone wait times and make sure you qualify for some level of cancellation before requesting your refund.
“There is confusion over the period for which refunds are available,” Kantrowitz says. “Payments made before this date, such as loans made years ago, are not eligible.” He adds that there is also confusion about whether a loan that has been fully repaid during the pandemic is eligible for repayment. Although the Ministry of Education has not directly addressed this issue, it says the loans repaid are likely eligible for repayments.
ANSWERING YOUR QUESTIONS ABOUT THE STUDENT LOAN
Do you have questions about student loan forgiveness? Check our frequently asked questions, which we update regularly as new details become available. If there are any questions we haven’t answered about Biden’s new student loan plan in the FAQ, email me at [email protected] and I’ll do my best to answer them.
Once your refund is issued, it will be added back to your student loan balance. For example: if you currently owe $2,000 and you paid $8,000 during the break and you request a refund, your balance will increase to $10,000 and will be eligible for a rebate. However, if you know you will still have a balance after cancellation, King does not recommend requesting a refund as this will only add more to what you owe.
But if it makes sense for your situation and you receive a refund, your next step is to request that this new total be reversed under Biden’s plan. The application to do this will not be available until early October, and the deadline to apply for student loan forgiveness is December 31, 2023.
According to Kantrowitz, it can take up to 60 days for borrowers to receive their repayments, which may affect the timing of the borrower’s request for student loan forgiveness. He suggests waiting to submit your forgiveness request until you receive your refund, “since this may affect the amount of debt that is forgiven.”
“Borrowers who wish to receive a discount before repayment restarts must submit the request for discount no later than November 15, 2022,” it says. “This suggests that the borrower should submit a request for repayment by September 15 to be sure that the repayment takes place before November 15, 2022.”
How King uses his $9,000 student loan repayment for other financial goals
King plans to hold onto his refund check until his student loan debt is officially deducted from his account later this year. This is a decision that experts recommend.
“I’m going to keep the check until I see with my own eyes that the cancellation has taken place,” she says. That way, she will still have the means to repay the loans according to her original plan if something goes wrong with Biden’s cancellation plan.
Once King receives her refund and if the cancellation goes as announced, she plans to put some of it into her emergency fund and some towards investments for herself and her children. But what you put your refund on may look different. Maybe you want to use that money for a down payment on a house or boost your emergency fund at a time when inflation is high and everything is more expensive.
Kantrowitz, along with other experts, suggest keeping your refund in an easy-to-withdraw low-risk account — like a high-yield savings account — until there are more details on the Biden’s plan or your loans are officially cancelled. There could be delays in the pardon process if it ends up being challenged in court by loan officers or the GOP.
“Borrowers may need to use the money to pay down more debt if they have debt left after forgiveness,” he says. “They may have to use the money to pay off their debt if the president’s pardon plan is blocked by the courts.”