Hundreds of thousands of borrowers made payments on federal student loans after forbearance began on March 13, 2020, hoping to pay off their debt sooner. But now that the White House has announced its intention to forgive up to $20,000 in student loan debtsome of these borrowers may be wondering how to get a refund.
Some may have paid their loan balance below the cancellation amount to which they are entitled, for example, and wish to maximize the amount discharged.
On September 13, the Ministry of Education said that a refund of the overpayment would be automatic for anyone who has repaid their debt below the cancellation amount to which they are entitled. That is, if you qualify for a $10,000 cancellation but pay the $8,000 balance during the pandemic, your $8,000 balance will be discharged and the remaining $2,000 will be refunded.
While this process will be automatic for many borrowers, others will first need to successfully apply for debt cancellation.
Other borrowers, who have a remaining balance even after the $10,000 or $20,000 debt is forgiven, can still receive refunds on voluntary payments made after March 13, 2020, by contacting their servicing agent. It is important to note that these repaid installments will increase your loan balance and your monthly payments. If you expect to have a balance after the waiver is applied and wish to request a refund, you can do so by contacting your repairer until December 31, 2023.
Here’s what you need to know if you might have a remaining balance but still want to request a refund.
Who can request a refund?
More than 40 million borrowers have been allowed to suspend payments, interest-free, during the pandemic. According to the White House, up to 27 million people could be eligible for debt cancellation. The maximum amount discharged is $10,000 per borrower, $20,000 if you have received a Pell Grant at some point in the past.
Those who have made payments or repaid their federally held loans during the interest-free forbearance — by one-time or lump sum payment — may be eligible for refunds. Payments made since March 13, 2020 are eligible. Reimbursement requests can only be made by you and reimbursed to you, even if someone else has made a payment on your loan.
If you consolidated your loans after March 13, 2020, payments you made before consolidation are not eligible for a refund.
Private student loan repayments are not included. Payments are also not made on some FFELP or Perkins loans.
How do I request a refund?
Getting started with getting a refund on payments is relatively simple if you have the right information at hand. You need:
Your loan servicer’s phone number.
Your social security number.
Payment confirmation numbers or bank payment information.
The address you would like your refund delivered to.
You can probably find the payment confirmation numbers on your loan service account portal under your payment history. Each payment has a unique identification number that will allow the repair representative to apply your refund accurately. You can find your bank transaction dates or check numbers on your bank account portal.
The first step is to call your loan officer. Your loan service representative might ask for your social security number to open your account. After verifying your account and identity, let them know that you want to request a refund on payments made during the interest-free forbearance period.
Expect long wait times, says Scott Buchanan, executive director of the Student Loan Servicing Alliance.
The representative will ask you which payments, in particular, you want to refund. To make this happen quickly and smoothly, be prepared to provide them with applicable payment confirmation numbers or transaction numbers.
You will also need to confirm your address on file: refunds will likely be made by paper cheque.
Then the representative will submit the request on your behalf and provide you with a confirmation.
When will I get my money back?
You should receive refund checks within six to 12 weeks, although some borrowers say they’ve cited longer processing times. You will also see your loan balance increase by the amount repaid during this period.
What happens if the cancellation is blocked?
A judge could grant an injunction for one of these lawsuits and stay the action if dismissed. If the cancellation is blocked, those requesting a refund will still see their balance increase by the refunded amount and will be obligated to refund that total. Interest starts accumulating again from January 2023, so having a larger balance means you will have to pay more interest.
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