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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:

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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. If you are eligible for a refund, it is usually a good idea to request a refund on all payments.

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 is set to expire at some point in 2023, but the exact timing will depend upon when the Supreme Court rules on the one-time forgiveness plan.

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.

Refund Procedure

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

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 Big Exception: Before I spell out the reasons for asking for a refund, I should first share the one exception to the rule.

Don’t ask for a refund if you don’t trust yourself to handle the money responsibly. For some people, a large chunk of money just sitting in an account is too much temptation. If you recognize this about yourself, don’t request a refund unless you absolutely need the money.

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. With some accounts now paying over 4% interest, this could be a valuable move for many borrowers.

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.

Waiting for Automatic Refunds

Some borrowers may potentially qualify for automatic refunds.

Should the Biden administration prevail in the Supreme Court on the one-time forgiveness case, some borrowers would receive automatic refunds.

However, waiting for an automatic refund isn’t advisable for several different reasons.

For starters, the Biden administration could lose its case. Second, the automated refund rules are somewhat complicated, and not all payments will necessarily be refunded. Most importantly, if you paid off your balance in full, the automated refund wouldn’t happen. However, if you request a refund, you can still qualify for the one-time forgiveness.

Refund Request Timeline

Servicers are currently telling borrowers that it will take about six to twelve weeks to process refund requests.

This extended timeline presents a challenge for borrowers. You will have to be patient while servicers process the request, but you can’t forget about the request either.

The best practice is probably to leave a reminder in your calendar to follow up on the refund request.

Frequently Asked Questions

What if I paid off my loan in full?

If you paid off the full balance of your student loan during the Covid-19 relief, you can still request a refund on all payments made.

However, it is important to keep in mind that it means your loan account will be re-opened. It will show back up on your credit report, and the eliminated debt will be restored.

Will I get taxed on the refund?

No. Overpayments are not considered taxable income.

How large of a refund can I receive?

It depends entirely on how much you paid. Whether you paid $5 or $50,000, you can get a refund on all payments made after March 13, 2020.

What if my servicer changed?

If your servicer changed, you are still eligible for a refund. However, there may be headaches involved in making it happen.

If the two servicers are not accommodating your request, filing a complaint with the CFPB may help expedite the process.

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.

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

  1. Refunds During the Payment Pause. My loan was transferred to Mohela. Do I need to call both service providers to initiate a refund or just my current service provider?

  2. We have been paying Our daughter’s loans (presently serviced by AidVantage) throughout the pandemic, and have paid lots extra. If she were to get refunds for these payments, would her present loan balance be reset to reflect the givebacks?

  3. Yes, I paid off some of my loans as well and was wondering the same. I paid 20 grand off in or around 2018 when I thought I’d qualify for the public service loan forgiveness, but they said I didn’t transfer all my loans in to Direct Loans. I worked for a non profit for over 10 years thinking I’d qualify. I refinanced my house and paid off my 20 grand debt. about 4 or 5 years ago. It was too stressful to deal with them. I wish I knew that this would happen and I would have just made minimum payments.
    -Over the past year? I paid off some of my most recent loans from 2021-2022. I still owe some, but would they credit me for what I’ve paid off when I didn’t really have to? Probably not.

  4. Can you receive refunds for pandemic loan payments if the loan was paid in full before you requested a refund?

    I made monthly payments to my consolidated loan between March 2020 and March 2021. In February 2021, one of the four loans (the one that the bulk of my payment was going towards) was paid in full. In March 2021, I realized that I might be eligible for TEPSLF (after being told many times that I did not qualify for PSLF), submitted an application, and paused my loan payments. Later in 2021, my remaining three loans were forgiven. I have requested pandemic and overpayment refunds (to the tune of $41k) from FedLoan, but it’s been a nightmare trying to actually get the money (or a solid answer from FedLoan). But am I even eligible for pandemic refunds for the loan that was paid off before I made the request?

    • Hi Chris,

      That is an excellent question, and you are the first person I’ve connected with who is requesting a refund on payments that paid off a loan in full. My hunch is that you won’t be able to get a refund, but it is definitely worth the effort to request one and see what they say. The worst they can do is say no.

      Please let us know how it goes for you!

  5. I had loans with MOHELA that were transferred to MyFedLoans in October 2021, for PSLF. I qualified for forgiveness and have requested a refund (3) times with MyFedLoan for the payments I made during the COVID payment pause (I continued making ALL payments during that time).
    MOHELA told me they couldn’t help me, because MyFedLoans services my loans. MyFedLoans originally told me they couldn’t help me – and then told me they could, because after verifying my PSLF status, they had all of my payment information.
    I’ve been jumping through hoops asking for this refund that seems like it’s never coming. I call them every couple of weeks… but they just keep telling me it takes time – 2 weeks-2 months, and it’s been over 2 months.
    I just don’t know who to contact, what to say, or do…. at this point….

    • That sounds awful Kyle.

      It’s also common for one servicer to try to tell you that the other servicer has to resolve the issue.

      I think your refund will be even more difficult to get once repayment starts and they are no longer issuing refunds, so I think an aggressive approach might work best.

      You can consider the following options:
      – Call each servicer again, and ask them to escalate your call to speak with someone with the authority to help. Explain what the other servicer is saying. Perhaps you could try arranging a 3-way call with both servicers on the line at the same time.
      – Contact the Department of Education. They may have an opinion on which servicer should process the refund.
      – File a complaint with the CFPB. In many cases, these complaints lead to a high-level review that can result in the solution you are looking for.
      – Contact your Congressional representative. An email from your rep’s office to the department of education or your servicer can really get the ball moving.

      As a final thought, MOHELA is about to become the servicer that handles all PSLF borrowers. In the coming months your loans will be transferred back to MOHELA. This may help your situation, but it could also make things more complicated. Just another thing to keep on your radar.

  6. I received a series of Federal Student Loan Refund Checks that I did not apply fir nor do I believe I qualify for. I paid off my Student Loans years ago before the Pandemic ever hit. I am scared to cash these. Do you have a clue why I would have received them?

  7. I received some refunds which include student loan payments from my government employer. Should I return those funds to my employer? I signed and completed a 1-year service agreement in 2020 required to receive the funds.

    • Great question Bobby. It is definitely a unique situation and one that would have been hard to predict. I’m not sure how to answer this one though. I’d say step number one would be taking a look at the agreement that you signed.

  8. I just got a series of refunds for my pslf and I am showing my loans are paid in full but I know they are not. I hope this doesn’t screwup my progress. I’ve called the department of education and they say the loan is showing paid in full I wonder if they are just getting transferred to another loan service provider

  9. 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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