MILWAUKEE — Federal student loan borrowers who made voluntary payments during the pandemic can apply for a refund. A student loan advisor says the larger remaining balance could turn into more relief.
The Institute of Student Loan Advisors, known as TISLA, says if you made a payment during the pause, you have to request a refund from your loan servicer before applying for student loan forgiveness, which is expected to begin as soon as October. TISLA’s president says that way, the refund can be processed in time to potentially get more debt canceled.
Jennifer Bridges of Milwaukee says she voluntarily decided to pay off the remaining $18,800 she owed in federal student loans over the past year because she didn’t think forgiveness was coming.
“They had no interest on it so I’m like, ‘might as well just pay it all off,’” she said.
Bridges says she initially regretted that decision after President Joe Biden announced up to $20,000 in relief last week for Pell grant recipients who make less than $125,000 individually, or $250,000 annually if married. But Bridges’ tune changed after learning she can apply for a refund and potentially have her remaining student loan balance forgiven.
“If I have to call and talk to 15 different people, I’ll do it,” she said. “I’m determined to get it.”
“You can call your servicer and ask for a refund and it’s as simple as that,” said Betsy Mayotte.
Mayotte is the president of TISLA, a non-profit organization dedicated to providing free and unbiased student loan advice for borrowers.
“They’re even allowing it for borrowers that paid their loans off during the Covid period,” she said. “Normally, it’s very difficult or impossible to reopen a paid-in-full loan.”
The U.S. Department of Education says only 1.2 percent of federal student loan borrowers continued to make payments since the pause went into effect at the beginning of the pandemic.
The Federal Student Aid website shows those who made payments since March of 2020 can apply for a refund, which will in turn increase your remaining balance. But Mayotte warns it depends on the borrower’s situation whether that’s a good idea.
“To be clear, if you’re only eligible for say the $10,000 (in forgiveness) and your balance right now is $12,000, there’s no point in asking for a refund,” she said. In fact, “I discourage it because when the payment pause is over, you’d end up paying interest on that extra amount. But let’s say you’re eligible for the $20,000 in forgiveness, and right now your balance is $18,000 and you paid at least $2,000 since March of 2020, ask for that refund and yes, it appears that amount will end up being forgiven.”
Mayotte says it could take weeks to months for borrowers to receive their reimbursement, but she says their balance should be adjusted by the loan servicer within days.
It is important to note that if you refinanced your federal student loan into a private loan, you are not going to be able to get a refund.
