How to get a refund for forbearance payments on federal student loans

Since the outbreak of the COVID-19 pandemic in March 2020, federal student loan payments have been suspended. Interest rates are fixed at 0%, giving savvy borrowers the option to only make principal payments on their student loan debt. According to a recent report by the Federal Reserve Bank of New York, about one in five federal student loan borrowers — myself included — took the opportunity to reduce their loan balances during COVID-19 forbearance.

However, circumstances changed during the 2020 presidential election when then-candidate Joe Biden campaigned for federal student loan forgiveness. Biden was inaugurated in January 2021, and student loan borrowers had a choice: should I expect my student loans to be forfeited, or should I continue to pay off the principal balance?

A final response came in August 2022, when the Biden administration announced it would forgive up to $10,000 in federal student loan debt for low- to middle-income borrowers and up to $20,000 for Pell Grant recipients. But by this point, some student debtors—again, including myself—had repaid their loan balances well below that amount.

In my case, I had reduced my federal student loan debt from $11,476 to $6,400 over the course of the pandemic forbearance. So when I found out that I was eligible for $10,000 student loan forgiveness, I had to ask myself if I was just out of luck with the $3,600 I overpaid, or if there was a possibility agrees to refund the difference. With the help of some other Internet detectives, I found the answer to my question on the Bundesschulenwerk website:

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Before I got too excited about the prospect of a federal student loan refund, I tempered my expectations. Personal past experience has shown that dealing with government student loan service providers can be difficult, especially since my loans were transferred to a new service provider in December 2021. Despite my hesitation, I was able to claim my $3,600 refund in just a few hours — and here’s how you can too:

1. Determine who you want to contact

The instructions for requesting a refund of student loan payments made during forbearance seem simple enough: contact your current state student loan servicer. You can find out who your service provider is by logging into your account dashboard on the FSA website.

2. Gather information

Before calling your service provider, it’s a good idea to arm yourself with some relevant information first. Here’s what you need:

  • Your account number. If your loans were transferred to a new servicer during the pandemic, you’ll need the account number of both your former and current loan servicer.
  • payment details. Record the payment amount and payment date for each payment you made from March 2020 to now. Because I paid off my debt through two separate service providers, I had to search through my bank accounts and personal records to find my detailed payment information – you may need to do the same.
  • your refund amount. Subtract your current loan balance from either $10,000 or $20,000 depending on your circumstances. In my case, I was supposed to qualify for $10,000 student loan forgiveness and my current loan balance is $6,400, so I reclaimed $3,600. And remember, only student loan payments made during forbearance are recoverable. Payments made before March 2020 will not be refunded.

This should go without saying, but make sure you meet the eligibility criteria to qualify for student loan forgiveness before bothering to apply for a refund. Specifically, your individual income cannot exceed $125,000 (or $250,000 for married couples). If you made payments during the pandemic and your loan balance is above the $10,000 or $20,000 waiver threshold, you may be able to apply for a refund — but you’ll still have to repay any balances over the waiver amount.

Additionally, private student loans do not qualify for federal student loan forgiveness.

3. Make a call (and wait on hold)

When you contact your state student loan servicer, take detailed notes about your conversation, such as: B. The date and time of your call and the name of the person you are speaking to. Ask the agent to issue you a refund for your payments until your loan balance reaches the expected forgiveness amount, either $10,000 or $20,000. And expect queues – it took me about 50 minutes to get through to an Aidvantage representative.

If you made payments to the same service provider during the pandemic, requesting a refund should be relatively easy. But if you’re like me and your loans were transferred to a new service provider during the payment pause, the process can be a bit trickier. This is because your current service provider may not have all of the information about payments you made to your previous service provider.

In my case, I made payments to two service providers during the deferral: $3,576 to FedLoan Servicing (between March 2020 and November 2021) and $1,500 to Aidvantage (from December 2021 to present). Initially, my service provider could only find the $1,500 worth of payments I had made to Aidvantage. We had to get a supervisor to look up my FedLoan payment history so I could request a refund of the entire $3,600 owed to me. This process took about two hours in total.

4. Keep an eye on your accounts

You must ask your credit servicer for specific details about your refund. The Aidvantage representative informed me that I would be reimbursed in about eight to 10 weeks depending on whether it was a direct deposit or a check. I called on August 30th, so it may take a while before I finally know if my request was successful.

You should also keep an eye on your student loan balance through your service provider’s online account portal, as your refund amount will be added back to your outstanding student loan debt. Because of this, you may notice your loan balance changing before you receive your refund. Additionally, you may choose to contact your credit servicer if you don’t see any updates to your account within a month or so.

5. Request forgiveness

Once you receive your refund and your loan balance is restored, you should be able to pay off the rest of your debt through federal student loan forgiveness. Applications are expected to open in early October. You can sign up on the US Department of Education’s Borrower Updates website to receive a notification when the application is online.

For me, the two hours I spent on the phone with my loan officer was worth the potential reward, allowing me to qualify for $10,000 in student debt cancellation. So, if you’re motivated enough to maximize your student loan forgiveness potential, call your current loan servicer right away. And remember, a little kindness and patience will get you far.

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