Under President Biden’s latest student loan relief actions, millions of borrowers can receive a refund of any student loan payments made since the forbearance.
In fact, according to Federal Student Aid (FSA), “[borrowers] can get a refund for any payment (including auto-debit payments) you make during the payment pause (beginning March 13, 2020).”
Now, many federal student loan borrowers are requesting refunds for their payments to maximize their student loan forgiveness eligibility. If you are a borrower who is unsure of whether you qualify for a student loan refund, or if requesting a refund is the right decision for you, keep reading.
Who Can Get a Refund?
Whether you qualify for a refund of student loan payments depends on the loan type you have. Here is a list of which loans do qualify, and which loans don’t.
Loans that Qualify for a Refund
Loans that Do Not Qualify for a Refund
Direct Subsidized Loans
Direct Unsubsidized Loans
Parent Plus Loans
Grad Plus Loans
Direct Consolidation Loans
Federal Perkins Loans Held By The U.S. Department Of Education
Federal Family Education Loans (FFELs) Held By The U.S. Department Of Education
Defaulted FFEL Loans Not Held By The U.S. Department Of Education
Defaulted Health Education Assistance Loans (HEAL)
Non-Defaulted FFEL Loans Not Held By The U.S. Department Of Education
Federal Perkins Loan Not Held By The U.S. Department Of Education
Non-Defaulted HEAL Loans
Private Student Loans
Should You Apply for a Refund?
Whether you should apply for a loan refund depends on your financial situation.
Recently, President Biden released his three-part student loan forgiveness plan that will cancel up to $20k for federal student loan borrowers who make less than $125,000 annually. If you have received a Pell Grant in the past, you are eligible for $20k in debt cancellation. Individuals who have not received a Pell Grant are eligible for $10k in debt cancellation.
Apply for a Refund If…
You are eligible for Biden’s loan forgiveness and you have paid down your debt to an amount less than how much you qualify for in loan forgiveness.
For example, let’s say you are eligible for $10,000 in student loan cancellation. You paid down your balance to $9,000 during the COVID-19 payment suspension. If you request a refund, you will receive $1,000, bringing your balance back up to $10,000. Then, your balance of $10,000 will be wiped out with loan forgiveness.
This way, you are maximizing your forgiveness eligibility while pocketing some cash.
Don’t Apply for a Refund If…
You are not eligible for Biden’s loan forgiveness.
If you do not qualify for loan forgiveness, you will not benefit from requesting a refund.
You have not paid your debt down to be below the amount of loan forgiveness you qualify for.
If you do qualify for loan forgiveness, but have not paid your loan balance down to be lower than the amount you can have forgiven, you will also not benefit from requesting a refund.
For example, if your initial balance was $30,000 and you paid $5,000 during the forbearance, you will have a remaining balance of $25,000. Regardless of the amount of forgiveness you qualify for, neither will bring your balance to 0. In this case, requesting a refund of the $5,000 you already paid would not make sense.
Note: The Department of Education has yet to release more information about Biden’s student loan forgiveness. Until then, it is uncertain whether a student loan refund could impact your eligibility for student loan forgiveness. In fact, some experts have advised waiting until more information is released, as a refund may impact how much you are able to receive in forgiveness.
It may be wise to wait until additional information is provided before requesting a refund on your student loan payments, especially if you want to benefit from student loan forgiveness.
The latest rates from Sparrow’s partners
If you want to skip pre-qualification and apply directly with a lender, you can do so by clicking Apply below.
How to Apply for A Refund
To apply for a refund, you will need the following information:
- The contact information for your loan servicer
- Your Social Security Number
- A list with the number of payments you’ve made since forbearance, the date the payment was processed, and the amount you paid
- Your billing address
- Bank information
First, you’ll want to call your loan servicer. Once you’re in contact with a representative, ask for a loan refund for payments made during the forbearance.
Specify which loans you want a refund for, and be ready to share any information on your loan payments if necessary. Your loan provider may ask you for your billing address, social security number, and banking information.
While you are on the line, be sure to ask your loan servicer about the estimated timeline for when you will receive a refund on your loans. After providing them with the requested information, you should be good to go. Your loan servicer will send a confirmation email that validates your loan refund request.
How Long Will It Take for the Refund to be Issued?
The loan refund can take anywhere from six to twelve weeks to be processed. Check your loan statements proactively to track the status of your loan refund.
If 12 weeks have passed since you have requested your refund and you have not heard back, contact your loan servicer to follow up.
What to Use the Refund For
Once you’re confident that requesting a refund for student loan payments is a financially beneficial decision for you, consider using the extra cash to better your financial situation in another way.
Pay off High-Interest Debt
Use the extra cash to pay off any high-interest debt you have, such as auto loans, private student loans, your mortgage, or any other form of debt.
To prevent interest from accruing rapidly, put your extra cash towards the principal of the loan (the principal of the loan is the initial amount borrowed, not including the interest that accrued) – especially if your interest rate is in the double digits.
Contribute to Emergency Fund
Over 50% of Americans can’t cover a $1,000 emergency charge with the amount in their savings account.
To be financially prepared in the face of an emergency, add the refunded money into your savings account. If you don’t have a savings account or are looking for a new place to store your money, consider opening a high-yield savings account (HYSA). A high-yield saving account allows you to earn interest on the amount of money that you have in your account without doing anything.
Pay Off Your Overdue Bills
If you have any payments or bills you need to catch up on, now is the time. Use the extra money to relieve your financial debts and cancel any overdue fees.
Student loan rates from our partners
Ascent
Ascent’s undergraduate and graduate student loans are funded by Bank of Lake Mills, or DR Bank, each Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: www.AscentFunding.com/Ts&Cs. Rates are effective as of 11/1/2024 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: AscentFunding.com/Rates. 1% Cash Back Graduation Reward subject to terms and conditions. Cosigned Credit-Based Loan student must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest rates require full
principal and interest payments, the shortest loan term, a cosigner, and are only available for our most creditworthy applicants and cosigners with the highest average credit scores. Actual APR offered may be higher or lower than the repayment examples above, based on the amount of time you spend in school and any grace period you have before repayment begins.
Ascent’s undergraduate and graduate student loans are funded by Bank of Lake Mills, or DR Bank, each Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: www.AscentFunding.com/Ts&Cs. Rates are effective as of 11/1/2024 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: AscentFunding.com/Rates. 1% Cash Back Graduation Reward subject to terms and conditions. Cosigned Credit-Based Loan student must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest rates require full
principal and interest payments, the shortest loan term, a cosigner, and are only available for our most creditworthy applicants and cosigners with the highest average credit scores. Actual APR offered may be higher or lower than the repayment examples above, based on the amount of time you spend in school and any grace period you have before repayment begins.
LendKey
1 – Terms and Conditions Apply
Loan products, terms, and benefits may be modified or discontinued by participating lenders at any time without notice. Rates displayed are reserved for the most creditworthy consumers who enroll to make automatic monthly payments. Your initial rate will be determined after a review of your application and credit profile. Variable rates may increase after consummation. You must be either a U.S. citizen or Permanent Resident in an eligible state and from an eligible school, and meet the lender’s credit and income requirements to qualify for a loan. Certain membership requirements (including the opening of a share account, a minimum share account deposit, and the payment of any applicable association fees in connection with membership) may apply in the event that an applicant wishes to apply with, and accept a loan offered from, a credit union lender. If you are not a member of the credit union lender, you may apply and become a member during the loan application process if you meet the lender’s eligibility criteria. Applying with a creditworthy cosigner may result in a better chance of loan approval and/or lower interest rate. Loans for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not available via LendKey.com.
2 – Cosigner Release
Some lenders participating on LendKey.com may offer the benefit of cosigner release. Cosigner release is subject to lender approval. In order to qualify, the borrower, alone, must meet the following requirements: (1) Make the required number of consecutive, on-time full principal and interest payments as indicated in the borrower’s credit agreement during the repayment period (excluding interest-only payments) immediately prior to the request. Any period of forbearance will reset the repayment clock; (2) The account cannot be in delinquent status; (3) The borrower must provide proof of income indicating that he/she meets the income requirements and pass a credit review demonstrating that he/she has a satisfactory credit history and the ability to assume full responsibility of loan repayment; (4) No bankruptcies or foreclosures in the last sixty months; and (5) No loan defaults.
3 – Autopay Rate Reduction
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments.
4 – AutoPay Discount & Lowest Interest Rate
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised APR is only available for loan terms of 10 years and is reserved for the highest qualified applicants, taking into consideration the applicant’s credit and other factors.
1 – Terms and Conditions Apply
Loan products, terms, and benefits may be modified or discontinued by participating lenders at any time without notice. Rates displayed are reserved for the most creditworthy consumers who enroll to make automatic monthly payments. Your initial rate will be determined after a review of your application and credit profile. Variable rates may increase after consummation. You must be either a U.S. citizen or Permanent Resident in an eligible state and from an eligible school, and meet the lender’s credit and income requirements to qualify for a loan. Certain membership requirements (including the opening of a share account, a minimum share account deposit, and the payment of any applicable association fees in connection with membership) may apply in the event that an applicant wishes to apply with, and accept a loan offered from, a credit union lender. If you are not a member of the credit union lender, you may apply and become a member during the loan application process if you meet the lender’s eligibility criteria. Applying with a creditworthy cosigner may result in a better chance of loan approval and/or lower interest rate. Loans for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not available via LendKey.com.
2 – Cosigner Release
Some lenders participating on LendKey.com may offer the benefit of cosigner release. Cosigner release is subject to lender approval. In order to qualify, the borrower, alone, must meet the following requirements: (1) Make the required number of consecutive, on-time full principal and interest payments as indicated in the borrower’s credit agreement during the repayment period (excluding interest-only payments) immediately prior to the request. Any period of forbearance will reset the repayment clock; (2) The account cannot be in delinquent status; (3) The borrower must provide proof of income indicating that he/she meets the income requirements and pass a credit review demonstrating that he/she has a satisfactory credit history and the ability to assume full responsibility of loan repayment; (4) No bankruptcies or foreclosures in the last sixty months; and (5) No loan defaults.
3 – Autopay Rate Reduction
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments.
4 – AutoPay Discount & Lowest Interest Rate
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised APR is only available for loan terms of 10 years and is reserved for the highest qualified applicants, taking into consideration the applicant’s credit and other factors.
Earnest
Student Loan Origination (Private Student Loan) Interest Rate Disclosure:
Student Loan Origination (Private Student Loan) Interest Rate Disclosure:
College Ave
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
(1) All rates include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation.
(2) As certified by your school and less any other financial aid you might receive. Minimum $1,000.
(3) This informational repayment example uses typical loan terms for a freshman borrower who selects the Flat Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.78% fixed Annual Percentage Rate (“APR”): 54 monthly payments of $25 while in school, followed by 96 monthly payments of $176.21 while in the repayment period, for a total amount of payments of $18,266.38. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
Information advertised valid as of 11/1/2024. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of the Flat Repayment Option with the shortest available loan term.
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
(1) All rates include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation.
(2) As certified by your school and less any other financial aid you might receive. Minimum $1,000.
(3) This informational repayment example uses typical loan terms for a freshman borrower who selects the Flat Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.78% fixed Annual Percentage Rate (“APR”): 54 monthly payments of $25 while in school, followed by 96 monthly payments of $176.21 while in the repayment period, for a total amount of payments of $18,266.38. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
Information advertised valid as of 11/1/2024. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of the Flat Repayment Option with the shortest available loan term.
Closing Thoughts From the Nest
Requesting a refund of student loan payments made since the COVID-19 forbearance is a win for many borrowers, especially in combination with student loan forgiveness.
However, it’s important to note that President Biden’s student loan forgiveness plan is being updated regularly. Experts do not have all the answers yet, and staying up-to-date on any changes that may affect you as a borrower is crucial.
You can subscribe to the Department of Education’s mailing list to receive email updates on any new changes on student loan forgiveness.