Even though President Joe Biden's plan for student loan forgiveness is stalled in court, some student loan borrowers are starting to get refund checks from the government.
After the pandemic halt went into force in March 2020, interest rates dropped to zero and payments were suspended. As a result, borrowers who paid off their student loans after that time received money from the government.
Student Loan Payment Refund
Because millions of borrowers anticipate having at least $10,000 in student debt forgiven, a previously little-known component of the COVID-19 stimulus program is receiving new attention.
These checks are a part of that provision. It's the first obvious indication of Biden's strategy's success for many. After multiple extensions, payments on student loan debt will start up again on January 1.
Borrowers who earn less than $125,000 annually, or $250,000 for married couples, are qualified for up to $10,000 in forgiveness under Biden's policy, or $20,000 if they were Pell Grant recipients. On October 17, the application for forgiveness was formally opened, and four days later, Biden announced that 22 million people had done so.
However, related strategies is currently on hold as a federal appeals court considers a legal challenge to the scheme brought by six states with a Republican-led state, according to Bloomberg via MSN.
Despite the pandemic hiatus, the Federal Reserve estimated in a May study that 8.8 million persons paid at least one payment between March 2020 and December 2021. That is more than 40% of the approximately 20 million borrowers who had payments due when the pandemic freeze went into place.
People who paid during the pandemic can get their money returned and, if qualified, apply for student loan forgiveness. While servicers had only received a few requests for refunds throughout the outbreak, according to Scott Buchanan, executive director of the Student Loan Servicing Alliance, that number skyrocketed in September.
According to the Federal Office of Student Aid website, you will automatically be refunded for any student loan payments you made between March 13, 2020, and December 31, 2022, "and your current loan balance is below the amount of debt relief you'll receive."
According to the website, you must first apply for a debt relief check under the administration's debt relief scheme.
The website also states that you won't get an automatic refund check if you made loan payments during the hiatus but your current debt level is higher than the amount of debt relief you will receive. This is so that your loan balance will receive the full amount of the debt relief, as per Newsweek via MSN.
Other student loans that are not owned by the federal government may also be excluded from refund eligibility. You will need to do this in order to speak with your direct loan provider about your options for a refund.
Biden Administration's Student Loan Forgiveness Plan
The Department of Education reports that there is a provision in the student loan forgiveness plan that states: "If you made voluntary payments during the payment pause - from March 13, 2020, through Dec. 31, 2022 - and your current loan balance is below the amount of debt relief you'll receive, after you successfully apply for and receive debt relief under the Administration's debt relief plan, we'll automatically refund the amount you paid during the payment pause."
Per GoBankingRates, borrowers must initially submit their student loan debt relief application even if no extra specific action is required in order to obtain an eligible payment return.
The government does, however, clarify that you won't receive an automatic refund after you apply for debt relief if you made payments during the payment stop and your current total is more than the amount of debt relief you receive.
According to the Biden plan, debtors whose income in 2020 or 2021 was less than $125,000 (or $250,000 for households) may be eligible for up to $10,000 in federal student loan forgiveness.
For Pell Grant recipients, the amount increases to a maximum cancellation of $20,000 in student loans. Your eligibility if you are a dependent student is determined by your parents' income.
According to studentaid.gov, the majority of federal loans are eligible, including parent PLUS and graduate PLUS loans, consolidation loans, federal family education loan (FFEL) program loans held by the department, Perkins loans owned by the department, and defaulted loans.
