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Expanded PSLF Means Huge Refunds for Some Borrowers

The recent changes to Public Service Loan Forgiveness may mean that borrowers who had FFELP or Perkins loans get a huge refund.

Written By: Michael P. Lux, Esq.

Published:

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Last week’s bombshell announcement on expanded Public Service Loan Forgiveness was life-changing news for many borrowers. Borrowers who had FFEL and Perkins loans may now qualify for forgiveness. Those who were on the wrong repayment plan will also benefit.

The cherry on top of this great news is that many borrowers will receive refunds for previous payments.

For many years, advocates have been calling for PSLF changes to help borrowers who had issues with repayment plan or loan eligibility. Refunding prior payments is a surprise.

While these refunds are great news, several significant exceptions might prevent borrowers from collecting a refund check.

How Borrowers Who Qualify Under the Expanded Public Service Loan Forgiveness Get Refunds

To qualify for Public Service Loan Forgiveness, borrowers must make a total of 120 certified payments.

The recent changes mean that many borrowers will see a dramatic increase in their number of certified payments. Under the revised criteria, some borrowers will have qualified for PSLF many years ago.

Those who made more than 120 payments will receive a refund for the extra payments. The Department of Education has not released exact details on the refund procedure. However, if the refunds work like the Covid-19 refund requests, the refunds will be issued via the original payment method.

If you think there is even a chance that you qualify for a refund, I’d recommend calling your servicer to discuss your options for the refund. You don’t want them to mail a refund check to an old address.

Sherpa Thoughts: Why issue refunds on prior payments?

These refunds are likely an acknowledgment that the government recognizes that borrowers should have already been given forgiveness and that it was wrong to continue to collect payments.

Additionally, government attorneys may have concluded that refunds were necessary to avoid losing a lawsuit against former borrowers.

Exception: Borrowers Who Already Earned PSLF

Some borrowers consolidated their FFEL or Perkins loans many years ago. They may have already qualified for PSLF and had their loans discharged.

If this situation applies to you, there is no refund available for previous payments.

The only borrowers eligible for a refund are those who newly qualify for PSLF under the revised rules.

Exception: Payment Made Before Consolidation

Another major exception is that refunds will only be issued for payments made towards federal direct loans. This means that borrowers cannot get a refund for payments made towards FFEL or Perkins loans.

An example is the best way to explain this exception.

Suppose you made 60 payments towards an FFEL loan and then realized that it was not eligible for PSLF. At that point, you consolidated your FFEL loan into a federal direct loan so that you could eventually qualify for PSLF. Post consolidation, you made a total of 80 payments.

Under the expanded eligibility, the original 60 payments now count towards PSLF. Thus, you have made a total of 140 PSLF payments. Because you made the 20 extra payments towards a direct loan, they qualify for a refund.

However, if you didn’t consolidate and made all 140 payments towards the FFEL loan, you can still qualify for PSLF, but a refund isn’t available.

Exception: Parent PLUS Loans

A final exception to the refund policy is Parent PLUS loans.

Unfortuantely for many Parent PLUS borrowers, the news here is especially bleak.

To the surprise of many, the Department of Education did not include parent PLUS loans in the expanded PSLF rules. Parent PLUS borrowers can still consolidate to gain PSLF eligibility, but unlike FFEL and Perkins loans, prior payments towards a Parent PLUS loan won’t count.

Suggestions for Borrowers Hoping for a Refund

If there is even a chance that you qualify for a refund, I’d suggest the following steps:

  • Update your contact information. If your servicer issues a check, make sure it goes to the right place.
  • Send in updated Employer Certification Forms. Many borrowers didn’t send in an ECF for payments made towards FFEL loans because they knew the loans were not eligible. If you have old payments that are now eligible, make sure your public service is documented during that time.
  • Make copies of your payment history and all other loan documents. This step shouldn’t be necessary, but it might come in handy. The contract with FedLoan Servicing ends in December and many PSLF borrowers will have a new servicer. The Department of Education should have all of the necessary records, but if there is an issue, it helps to have backups.
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.

108 thoughts on “Expanded PSLF Means Huge Refunds for Some Borrowers”

  1. Was the servicer of a FEEL loan required, under law, to notify you that you made 120 payments and that you may be eligible for debt forgiveness if you consolidate to a direct loan. The PSLF seems like a total shell game. We had made an excess of 120 patments to a feel loan before consolidating and won’t be eligible for refund on excess payments because, surprise surprise, the service never notified us of it, in print or on phone. Miss a payment, though, and they would call and harass us every day.

    Reply
  2. My TEPSLF shows that I have 92 payments made while working in an eligible job of the 120 needed, but also shows 332 eligible payments in total. I am wondering what to expect next after receiving an email this morning from FSA (MOHLEA) saying they are in the process of updating my account. Should I be expecting a refund of any overpayment? I’m a bit confused with the recent news on expanded payment eligibility.

    Reply
    • It depends. The biggest factor will be whether or not you had FFEL loans. Payments made toward FFEL loans can benefit from the expanded eligibility, but they are not eligible for refunds.

      If your loans are federal direct loans with extra payments, you should have a refund coming.

      Your servicer should be able to explain your exact count and refund eligibility.

      Reply
      • Thank you for the response and insight. I have consolidated direct loans (DL), so I’m assuming MOHELA is currently factoring any amounts that would be owed or refunded. My account shows 332 “eligible” payments, of which 190 are additionally marked as “qualifying” for the TEPSLF.

      • I have had direct or federal loans and consolidated in march 2016 with naviet to help with repayment. Completed PLSF and have worked in public service since 1998 all employers have been certified and been told loans are forgiven with 0.00 and 173 of the 120 payments needed. So does that mean I could receive 53 payments in refund? And if so is that at the monthly payment rate? I am confused by this all. Loans discharged by fed student aid as of 8/18/23.

      • It’s possible.

        If you had FFEL loans, you won’t get a refund for the payments you made before consolidating them.

        Otherwise, I’d think you were justified in getting a refund for the 53 extra payments. The refund amount should be based on the actual amount paid for those extra payments.

        Before you get too excited, please keep in mind that it is the last 53 payments, and for many people, that includes the Covid-19 payment and interest pause, so you may have over three years’ worth of $0 payments.

        I’d suggest calling your servicer and asking about the refund status and if they know the amount.

  3. I have been making payments on my consolidated FFEL loans prior to the PSLF Oct. 2017 date count. I have since consolidated my loans through the federal gov. approved direct loan servicer and have had my loans forgiven. I made no payments under the direct loan servicer. I have been told that I am not entitled to any refund as I did not make any payments under the direct loan program. I had loans for myself and parent plus loans when serviced as a FFEL loan. What, if any, repayment am I due?

    Reply
    • Unfortuantely, it doesn’t sound like you will qualify for a refund based on the inforomation that you shared.

      FFEL loans were issued by third parties, such as banks and lenders. They collected the proceeds from the payments, and the government isn’t forcing them to refund the money.

      The refunds described in this article were on payments made directly to the government.

      I know this isn’t what you want to hear, but hopefully it makes sense.

      Reply
  4. I cannot find any information on whether a refund applies if one were in both the EDRP (education debt reduction program–it was a retention incentive) and PSLF. My loans were finally forgiven but I had overpaid. Those over-payments were made while I was in the EDRP program. Do you know anything about refunds for people who were also in EDRP at the same time as PSLF?

    Reply
    • This is a really interesting question, Shona. My only familiarity with the Education Debt Reduction Program is based on the information publically available.

      Like many other employer-based student loan repayment assistance programs, there may have been a contract that participants signed at the time they enrolled or when they received reimbursements for payments. If you still have that document, it should contain your answer.

      Reply
  5. If I made payments that would qualify under the waiver, but was not employed at the time, what will happen when I reach the 120 payments with my current employer?

    Right now I 85 payments under my current employer, and 79 payments from before I worked for this employer.

    Reply
    • For a payment to be certified, you must be working in an eligible job at the time the payment was made. If you were unemployed or working in the private sector, that time will not count toward PSLF — even under the limited wavier.

      However, if the 79 payments were made while you worked for a different PSLF-eligible employer, those payments can still get certified.

      Reply

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