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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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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:

Affiliate Disclosure and Integrity Pledge

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.

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

  1. Although it is not official, I have submitted final paperwork for PSLF. In speaking to them, they have indicated that I qualify for full forgiveness. They have me at 160 payments and 116 qualifying. The final submission will take care of the additional 4. So is it plausible that I would get a refund of 40 payments?

    Reply
  2. Hi Michael Lux,
    I started teaching full time at a public school in 2004. I have been at the same school district from 2004 to present. At that time I had a Navient (FFEL) student loan and have been making monthly payments since then.

    I currently have the Navient (FFEL) student loan and a Direct Unsub Consolidation Student Loan. I’m currently in the process of consolidating these two student loans into Direct Consolidation Loan to take advantage of the TPSLF program.

    I have been making monthly payments on the Navient loan since 2004. I have been making monthly payments on the Direct Consolidation Student Loan since December 2017. After my consolidation and PSLF Employer Verification form goes through (are approved), do I qualify for a refund? Specifically, a refund of the Direct Loan payments that I have make since Dec. 2017?

    Reply
      • Thank you for responding & for all the valuable information!

        Should I consolidate my Navient (FFEL) loan individually into a Direct Consolidation Loan OR consolidate my Navient loan AND my Direct Unsub Consolidation Student Loan together into one Direct Consolidation Loan?

        What would be the best thing for me to do to qualify for the TPSLF program and to possibly receive a refund for payments over 120 I have made on my Direct Unsub Consolidation Loan??

      • Hello Michael,
        Thank you for responding & for all the valuable information!

        Should I consolidate my Navient (FFEL) loan individually into a Direct Consolidation Loan OR consolidate my Navient loan AND my Direct Unsub Consolidation Student Loan together into one Direct Consolidation Loan?

        What would be the best thing for me to do to qualify for the TPSLF program and to possibly receive a refund for payments over 120 I have made on my Direct Unsub Consolidation Loan??

  3. Hello Michelle,
    Congratulations!! What type (servicers) of student loans did you consolidate? I just consolidated my Navient (FFEL) & Direct Loans.

    Additionally, how long did it take to consolidate your student loans and how long did it take to receive the refund check?

    Reply
  4. Do you think they are considering or will refund qualifying payments made on FFEL loans prior to consolidation? This decision seems inconsistent with the very premise of the waiver – to provide credit for payments that should have counted toward PSLF. On one hand, for forgiveness they count, but on the other hand, for the refund, they don’t. I feel like like they should reconsider, especially since private loans companies were not forthcoming about consolidation benefits, even when I called asking questions in 2020 about payment hold, and the recent lawsuit won by Attorney Shapiro is a testament to this. Is anyone trying to reverse this decision?

    Reply
    • This is a great question. Ultimately, I think that the reason they are not refunding FFEL loans comes down to the federal vs. federally held distinction. The government doesn’t own FFEL loans. Instead, it guarantees that they will get repaid.

      I think the government is unlikely to be willing to pay off a debt owed to a third party, forgive the debt, and then offer refunds for payments that went to that third party.

      The FFEL program has been a mess for many different reasons, but I suspect the limited waiver is the best-case scenario for borrowers pursuing PSLF.

      Reply
      • Thanks for your website – so many questions have been clearly answered here! What are your thoughts requesting refunds from the individual FFEL lenders? I reached 120 payments with Navient in 2017 and was told that my loans didn’t qualify for forgiveness, therefore I continued to make Income-Based payments which didn’t even cover the interest each month. I never made enough to make a difference in the principal, but they continued to make money off me! I retired from teaching last year and was so thrilled to have received the PSLForgiveness however I think about how lovely it would be to be refunded the $13,000 that I overpaid.

      • Thank you for the kind words!

        I wish I could offer you some words of hope regarding refunds, but I would be shocked if Navient or any other FFEL lender refunded any payments. I can’t imagine a scenario in which that happens.

    • I actually had 137 qualifying payments toward the PSLFP. I was forgiven 120. I was issued a refund for the balance (over $10,000) that was issued by the US Treasury.

      Reply
  5. I feel like a jackass because I know so little compared to the rest of you. I started teaching in 2007. I feel like I‘ve been paying my loans for 1000 years. The first reassessment left me with 12 more payments, the POOF, it was all forgiven. AND THEN 25 deposits of $398 dollars appeared in my bank account. $10,000. I didn’t expect any refund! What witchcraft is this? I’m grateful and also so mad that it was apparently this easy for them to give us relief this whole time.

    Reply
  6. Last week my loan was forgiven “effective 7/31/19.” When I saw it had been forgiven, I briefly saw a $505 credit on my account, but I have made 145 qualifying payments in total, all on a direct loan; I hit 120 payments before 7/31/19 and continued to make some payments after that date. I was hoping I would get refunded for all of the 25 extra payments, but it sounds like they’re only planning on sending me $505. Am I misunderstanding how refunds are being calculated?

    Reply
    • If you had a direct loan at the time forgiveness was earned, you should get a refund on all of the subsequent payments. If you made later payments on a non-direct loan, such as an FFEL loan, those payments don’t qualify for a refund.

      Reply
    • I took screenshots all along the way, just to have records, because at each step, they seem to POOF remove the previous actions. But anyway, It took about 2-3 months before my big refund check came after they forgave my loans. And at first, they said I only had 100 qualifying payments. But instead I had paid well over the 120 payments (been paying since 1993).

      Reply

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