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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.


Affiliate Disclosure and Integrity Pledge

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.


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.

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

  1. I recently consolidated to a Direct loan from an FFEL loan with Navient. I have talked with Fed Loan Servicing agents (2x) who both said I would eventually get refunded for the overpayment (past October 2017) in addition to the amount still owed forgiven. I am still waiting to have the remaining balance forgiven, as my consolidation back to a direct loan occurred about 6 weeks ago. Still waiting that my employment qualifies (which is should) Fingers cross both the forgiveness and a refund both occur. Melissa’s response on 1/14/22 makes a little nervous on the refund portion.

    • Hi Tim. I was told the same thing before my FFEL consolidation went through successfully. I called FedLoan Servicing the day after my account reflected a zero loan balance to inquire about the refund of my extra FFEL payments. This is when I was told that a refund would not be coming since all of my overpayments were made before the consolidation to a direct federal loan. Earlier this week, I called the Federal Student Aid Ombudsman. I was instructed to file a complaint on studentaid.gov/feedback which I did. I also called the office of Senator Elizabeth Warren and will be requesting in writing that her staff intervene on my behalf. I have been commenting on this issue on different social media channels too. It is possible that the Department of Education is still examining this issue, but I would be vocal about it now. Hope this helps!

      • Thanks for the information. That is disappointing! Hopefully your right that the Department of education is still examining the issue. I will file a complaint also once/if my remaining balance is forgiven.

      • Totally disappointing! I was expecting a refund for all payments beyond October 1, 2017 too. Another roadblock but par for the course I guess 🙂

  2. Hello Michael. I am a lawyer and graduated in May 2007. I have been working at a hospital since September 2007. The hospital is a 501(c)(3).

    Like a lot of law school graduates, I graduated with six figure loans. I applied and was rejected from the PSLF program in 2017 due to the usual wrong loan type, payment plan, etc. I was one of the unfortunate recipients of FFEL loans simply due to the timing of my law school years (2004-2007).

    However, I consolidated my remaining FFEL loans into a direct federal loan in October 2021. The loan was officially consolidated on November 2, 2021. On January 11, 2022, I received notice that my remaining balance ($25,540) had been discharged through the PSLF waiver. I do not even want to tell you how much that I have spent repaying my federal and private student loans, but $25K is not chump change either.

    I also thought that a refund would be coming for my years of federal payments beyond October 2017. However, FedLoan Servicing informed me when I called this week that refunds will not be issued for those four years since they can only look at the period for which I had a direct federal loan. This seems odd to me since I only had received the discharge due to my FFEL loans being taken into consideration in the first place.

    I plan on contacting the Federal Student Aid Ombudsman and Senator Elizabeth Warren. I grew up in Massachusetts. These FFEL loans have been nothing but trouble! I also did not qualify for Covid loan relief since I had commercially owned FFEL loans and not ones owned by the Department of Education. We need to band together in demanding FFEL refunds!

    • Thanks for taking the time to share your thoughts, Melissa. I’m in agreement with you on the FFEL mess. I also think your plan to contact the Ombudsman and Senator Warren is a good one.

      There are plenty of borrowers in your position, and hopefully, we can apply enough pressure to the right people to get them to change the policy.

      • Thanks Michael! I will circle back with any updates. I appreciate you and the information on your site.

  3. Where is the authority on the assertion that a student borrower may only receive a refund if the overpayments were made on direct loans and not FFEL loan payments that otherwise now qualify through consolidation? On studentaid, gov, it does not speak to this issue. It merely states that if you have made more than 120 payments on an “existing” direct federal loan, you will receive a refund. It does not distinguish. In fact, it is silent on this issue. Has the DOE specified policy on this issue? The language of an “existing” direct federal loan, in my guess, was used to exempt those who have already benefited from the PSLF program, that is, those who have already had their loans discharged, from receiving a refund. Those loans no longer exist, as they have been paid off. I have spoken to Fedloan servicing agents, and was told I would qualify for a refund now that I recently consolidated my FFEL loans into one direct loan, even though all of my payments that were made (including overpayments) were made on FFEL loans prior to consolidation. I have made almost two years of overpayment payments based on prior FFEL loan payments. If you think about it, this makes sense. How can the government forgive loans retroactively under this new program and then keep two years of overpayments? Wouldn’t that be considered conversion of property? I don’t think an entity can forgive a loan and then keep the rest of the overpayment money for itself without justification. That is probably why the DOE brought up the concept of overpayments with the new program, out of fear of being sued.

    • There are some excellent questions here. I don’t want to speculate about any potential lawsuits, but I can try to clarify the DOE policy as I understand it. I think the big issue is that an FFEL loan is not a federal direct loan. FFEL loans are assets of a third party, but they are guaranteed by the federal government. Consolidation pays off the loan and creates a new federal direct loan.

      Unfortunately, I don’t think you can rely upon the assurances of the customer service reps at Fedloan servicing. You are definitely right that you have paid more than your fair share, and I hope that I’m wrong on this issue, but I’d be surprised if you received a refund. That said, it is possible that they have tweaked the refund policy. Please keep us posted on how it goes for you.

      • I agree with you. FFEL loans are not technically direct loans. However, from what I have read, it appears the spirit of the limited waiver changes that allow these payments to now be counted through consolidation rests on an assumption that borrowers may have been misled somewhere down the line (usually by customer service representatives of loan servicers) into thinking that they do not qualify for PSLF or were not told the proper rules for it, and thus abandoned their quest for loan forgiveness. This is a second chance for many deceived borrows. It will be deeply saddening if it is ultimately true that someone such as myself who was misled can now get his loans graciously forgiven by the government, but at the same time, by the way, “we are keeping your extra payments for no real reason” that you otherwise would not have had to make if you were not misled in the first place. Surely, that is not what the intent is for this limited program, especially since there is no clear policy yet set forth concerning refunds, only the vague general language on studentaid.gov. I just hope that the government’s plan is not to pat public servants on the back and reward them for years of having to endure a mishandled program but at the same time punch them in the chest with respect to overpayments. I will keep you posted. Thanks for your response.

  4. I think the lack of refunds for those making payments to a consolidated FFEL needs contested.

    The date of when payments count is for those payments after October 1, 2007. I paid under an income-driven repayment plan. BTW, why were notices not sent to all direct loan recipients in 2007 that certain consolidation programs would be excluded?

    Now, I discovered on 10/29/2014 that my FFEL consolidated loan was not going to count towards PSLF. (That is when a new fact sheet about the program was issued.) I had planned that I would have cancellation at the end of 2017, which was my “Free by 40” plan (I had two private loans I was paying off at a rate to have them paid off by that time as well.)

    So, I could have decided at that moment to re-consolidate back to a “Direct” loan and my clock and payment count would have had to start over, which would have meant another 120 payments AND payments at a rate greater than what I was paying at the time, such that at the end of 120 payments, I would have paid off my loan, there would have been nothing left to “forgive.” So that would have been a dumb choice; the direct loan wasn’t offering a better interest rate, and was going to make me pay more than the $372.14 a month I was already paying (about $500 a month instead.) So there was no incentive for me to consolidate at that time. But HAD I consolidated then, and kept paying… I hit 120 payments on 1/15/2018. So, that means I have made 46 extra payments since then; and had they been under direct, I would be entitled to my $17,118.44 back (or more since DIRECT was going to have me pay more per month.)

    I have worked at 501c3’s since leaving law school. I paid off my two private loans. I currently have $30,666 on my loan and I consolidated this month to direct to get into the expanded program.

    I should just be happy that the remaining $30k is being forgiven (I’ll believe when I see) but each time I think I have done the right thing with my loans, it has bit me in the tuches!

    • Well said! The limited waiver is a huge step forward to address some major issues, but it certainly doesn’t make things right. There is more work to be done.

      Hopefully your last 30k gets forgiven without any further headaches. Best of luck to you and thanks for your service!

  5. Can you point to the source for this assertion?

    “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.”



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