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Covid-19 Relief: Refunds on Federal Student Loan Payments

Borrowers can now get refunds for federal student loan payments made during the Covid-19 pandemic. All borrowers should ask for a refund.

Written By: Michael P. Lux, Esq.

Last Updated:

Covid-19 Relief: Refunds on Federal Student Loan Payments

Borrowers can now get refunds for federal student loan payments made during the Covid-19 pandemic. All borrowers should ask for a refund.

Written By: Michael P. Lux, Esq.

Last Updated:

The Department of Education is currently issuing payment refunds to borrowers who made federal student loan payments during the Covid-19 Pandemic.

This relief includes payments that were made by an automatic direct deposit and by manual withdrawal. Borrowers who have had wages garnished are also eligible for a refund.

All borrowers should check to see if they can qualify for a refund, including those that paid extra in an attempt to pay down their debt.

Covid-19 Refund Basics

As of March 13, 2020, the Department of Education suspended payments and interest on all federally held student loans.

The interest and payment freeze currently expires on September 30th, 2021, but it may be extended further. The government has already extended the Covid-19 relief several times.

Borrowers have the right to a refund on all payments made after March 13, 2020.

What About Student Loan Forgiveness? Even though the Department of Education has suspended payments and interest, borrowers can continue to work towards student loan forgiveness. This includes Public Service Loan Forgiveness and Income-Driven Repayment Forgiveness. Borrowers do not need to make payments to have the Covid-19 relief time count towards forgiveness.

How to Get a Refund

In most cases, getting a student loan payment refund requires a phone call to your loan servicer.

Servicers MyFedLoan and Great Lakes do not have an automated process for getting a refund. However, they have acknowledged the refund policy on their respective pages and instructed borrowers to call them to initiate a refund.

Before calling to request a refund, borrowers should log in to their loan servicer account to pull up their payment history. Borrowers will need this information to verify that they receive a refund for all eligible payments.

To qualify for a refund, borrowers do not need to show a hardship or that the Covid-19 pandemic has impacted them. The only requirement is that they request a refund.

Why Should All Borrowers Request a Refund?

During the pandemic, many borrowers have continued to make payments on their student loans. These borrowers continued to make payments to take advantage of the 0% interest and reduce their balance.

The borrowers making extra payments should be applauded for their initiative, but there is a better way to manage federal debt during this time.

Rather than making payments, borrowers should set aside money for their federal student loans in a high yield savings account. After the Covid-19 relief, borrowers can make a large student loan payment using the money set aside.

The minor inconvenience of asking for a refund is nothing compared to the many advantages.

The Advantages of Getting a Covid-19 Refund on Federal Student Loan Payments

Student Loan Forgiveness – There is growing support for some form of student loan forgiveness for borrowers. One proposal calls for the forgiveness of $10,000 worth of federal loans for all borrowers. Another leading proposal would wipe away $50,000 worth of debt. Even though both proposals are highly unlikely to become a reality, it is possible. If the improbable happens, failing to get a timely refund could cause borrowers to miss out.

Earn Extra Interest – The battle against student debt is a fight against interest. Each day student loans generate more interest. The payment and interest freeze is the one time that borrowers can afford to wait to make payments. Rather than paying down a student loan balance, the money can sit in a high-yield savings account working for the borrower.

Flexibility in an Emergency – This is the biggest and most important reason to get a refund on previous payments. The Covid-19 pandemic has created a lot of economic uncertainty. Some people are getting sick and unable to earn a living, while others keep their job but face massive medical bills. Those that stay healthy may see their jobs eliminated. A larger emergency fund is a valuable resource. When the interest freeze eventually ends, borrowers can reexamine their plan. For now, there is no harm in setting aside student loan payments for a rainy day.

About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

2 thoughts on “Covid-19 Relief: Refunds on Federal Student Loan Payments”

  1. I just got a series of refund checks that I was not expecting. Are they still crediting my account for what I paid? If so, I will just send it all back as payment. I don’t want or need the money now.

    • That is strange.

      Did you request a refund for previous payments? I’ve never heard of them getting sent back without the borrower first requesting a refund. I’d encourage you to call your servicer to get to the bottom of what is happening and why.

      If it was a legitimate refund from your loan servicer, you can always return the funds. Because you are likely being charged 0% interest right now, there isn’t really a harm to getting the refund and then returning those same funds, other than the added work it caused you.


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