You may get an automatic refund for your student loan payments: Here’s why
(NEXSTAR) – If you made voluntary payments on your federal student loans during the COVID-19 payment pause, you’re likely eligible to receive an automatic refund, according to federal officials.
As part of President Biden’s recently announced plan to forgive up to $20,000 per federal borrower, those that have made payments on or even paid off their loans since March 2020 were given the chance to request a refund for their payments from their loan servicer.
But, according to updated guidance from the Office of Federal Student Aid, qualifying borrowers may not have to request a refund — they could receive it automatically.
Previously, borrowers have been instructed to contact their federal student loan servicer to request a refund. You would have to provide payment confirmation, which payments they would like to have refunded, and other necessary information, according to NerdWallet.
The Office of Federal Student Aid now has information on its site stating borrowers will automatically receive a refund if they meet two requirements.
First, you have to successfully apply for and receive debt relief under Biden’s one-time cancellation plan. This means you’ll need to meet the necessary qualifications and fill out an application for student loan forgiveness. According to the Department of Education, that form won’t be available until next month.
Second, the payments you’ve made since March 13, 2020, when then-President Trump enacted the student loan payment pause, must have brought your loan balance below the maximum relief you’re eligible to receive but did not pay off your loan in full.
Officials gave this example: Let’s say you had $10,500 before the payment pause. Since March 2020, you’ve made $1,000 in payments, which brings your balance to $9,500. You’re eligible to receive $10,000 in federal student loan forgiveness, meaning the Department of Education will discharge your balance of $9,500 and refund you $500.
If you don’t meet both requirements above, officials say you can still receive a refund on the voluntary payments you’ve made since March 2020. Refunded payments will, however, increase your loan balance and your monthly payments, the Federal Student Aid office reports. Refunds can be requested until December 31, 2023.
If you consolidated your loans after March 13, 2020, the Federal Student Aid office says you cannot receive a refund on voluntary payments made before consolidation.
In addition to potentially qualifying for automatic refunds, you may also qualify for automatic student loan forgiveness, meaning you wouldn’t have to fill out an application. Details on automatic federal student loan relief can be found here.
Until the Department of Education makes the application form available, there are a few things you can do. You can register to be notified when the application is available by filling out this form, determine your eligibility, and prepare your financial information.