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Some Borrowers Will Get Huge Refunds From Biden Student Loan Forgiveness

Borrowers who paid off their loans in full could receive a refund of up to $20,000.

Written By: Michael P. Lux, Esq.


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In a pleasant surprise, the Department of Education recently revealed that some borrowers would receive refunds under the new Biden Loan Forgiveness Program.

Sadly, the group of borrowers eligible for refunds is relatively small. Those eligible could receive checks for thousands of dollars, however.

Who Gets a Refund Under the Biden Forgiveness Automatic Refund Policy?

The Department of Education recently updated the loan cancellation guide with a valuable nugget of information.

Under the policy, you can qualify for a refund if:

  1. You successfully apply for and receive debt relief under the Administration’s debt relief plan, AND
  2. Your voluntary payments during the payment pause brought your balance below the maximum debt relief amount you’re eligible to receive but did not pay off your loan in full.

There is an interesting workaround for the people who paid in full. But for now, let’s first look at an example of how the automatic refund works:

If you qualify for $10,000 in forgiveness and reduced your balance from $10,500 to $9,500 during the pandemic, you could get a refund of $500 when your remaining balance of $9,500 is canceled.

Why Issue Automatic Refunds?

The automated refund policy makes sense for a couple of important reasons.

For starters, it is more fair. Borrowers have been able to request refunds for payments made during the pandemic, but not everyone knows about this policy. Refunds shouldn’t be limited to borrowers who understand the fine print of an unrelated procedure.

Additionally, and perhaps more importantly, servicers will be slammed over the next few months. If borrowers don’t have to call in to ask for a refund, that is one less issue for customer service representatives to address.

While the automated refund policy is excellent for borrowers in general, I still suggest that readers of this site manually request a refund right away.

Requesting a Manual Refund is the Best Strategy

If you made extra payments during the payment pause, there are two advantages to asking for a refund right now.

First, you will potentially receive the refund quicker. You can call today and start the process immediately. The application for forgiveness won’t be available until next month at the earliest. The sooner you get your money back, the better.

Secondly, asking for a refund right away helps prevent frustrating servicer errors. Going back to the example of the borrower expecting a $500 refund, imagine for a second that there was a mistake in processing the forgiveness application. The $9,500 was forgiven, but no refund was issued. If that happens, the loan is paid in full, and requesting a refund becomes even more challenging. In this case, by anticipating a potential mistake, we can avoid a difficult situation.

If you paid off your loan in full during the pandemic, you will want to request a refund.

Refunds for Borrowers who Paid in Full

If you have paid in full, there are two rules to understand.

If your federal student loan balance is paid in full:

  1. You do not get a refund under the automated refund policy, and
  2. You are not eligible for the Biden Forgiveness Program.

However, if you are in the category of people who paid off their loans during the pandemic, there is a workaround.

According to the non-profit Student Borrower Protection Center, all borrowers who made payments on their federally-held loans can request a refund on all of these payments. Notably, they say this policy includes borrowers who paid off their debt in full.

Thus, if you have paid off your loan in full, you should immediately call your servicer and ask for a refund. Once the refund is issued, you again have a loan with a balance owed, and that loan is eligible for cancellation under the Biden Forgiveness Program.

For some borrowers, this could put an extra $20,000 in their pockets.

Tips for Getting the Refund

Call your servicer right away. The longer you wait, the longer the hold times are likely to be. Additionally, processing a refund request can take several weeks. There isn’t a benefit to dragging your feet on this one. If you are unsure of who services your loans, check the federal database.

Call again if you don’t get the help you need. Servicers are overwhelmed, and some employees are better than others. If the person you talk to doesn’t understand the rules or can’t help, hang up and call again. This is a tedious strategy, especially if there are long hold times, but it helps ensure the best outcome.

Be patient but persistent. The refund request can take weeks or months to get paid. The forgiveness application won’t be available until October at the earliest. However, the repayment restart begins on January 1, 2023. It’s a tight timeline when you factor in processing times. Borrowers should stay on top of things but also understand that nothing happens overnight.

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.

6 thoughts on “Some Borrowers Will Get Huge Refunds From Biden Student Loan Forgiveness”

  1. My history: I took out 11 Direct Loans, 8 FFELP loans, I received several Pell Grants, and I always had work/study jobs when in school. In 2003, I was misled, or lied to, by a rep from Sallie Mae, who said I needed to consolidate into a Sallie Mae Federally Guaranteed Loan because “the Federal Government was getting out of the Student Loan business”. When I was turned down for the Public Service Forgiveness Program in 2007, this is when I learned that my Sallie Mae student loan was considered “Private”. In 2020, this Private Loan status meant that I had to continue to pay my loan throughout the Pandemic, when others were allowed to halt their payments.
    Somewhere along the way, my Sallie Mae loan was sold to Navient. I consolidated the Navient loan into a Direct Loan on September 15, 2022 as you and a Studentaid.gov phone rep suggested, but the only correspondence I have received from the Dept. of Education is that the application has been forwarded to Mothela.
    The Studentaid.gov phone rep told me to apply for both the Biden Forgiveness Plan AND the Public Service Forgiveness Plan, because “things continue to change everyday”. This is what I am doing, I am applying for both programs.
    Your article is enlightening. Thank you so much for your information and expertise.
    My most pressing question to you at the moment is: Should I ask for a refund of my 2.5 Pandemic year payments from Navient? Or should I wait to hear from Mothela? I have been in limbo for 3 weeks….I will be sending another payment to Navient because Mothela is not yet my service provider, per the Studentaid.gov website.
    Also, as I have always submitted a bit more than a minimum payment on my loan. Will I receive this amount also?
    Thank you so much for your help,

    • First of all, great job summarizing your loan history, Natalie. You covered a lot of ground in a little bit of space.

      To answer your question, I don’t know if asking for a refund from Navient will do you any good. It sounds like your loans were commercially-held FFELP loans during those 2.5 years, and as such, they wouldn’t be eligible for a refund. However, there isn’t any harm in asking them for a refund. The worst they can tell you is no.

      As for following up with MOHELA, its one of those situations were we can probably expect that it will take a while for them to get back to you given all of the activity over the last month. I’m glad to read that you applied to consoidate on 9/15. Based on that detail and the Pell grant you mentioned, you should avoid most of the FFEL chaos and have $20,000 forgiven soon.

      One other thing to consider is getting another PSLF employer certification on file. I don’t know when you last completed the paperwork, but now would be a great time to get another on file.

      • Thank you so much, Michael.
        I am close to paying off my loan, which seems like a miracle itself! So, Forgiveness in a large amount will not be coming my way. But I am grateful for any help.
        I was hoping that the Biden Student Loan Forgiveness Program would rectify the stipulation that required myself and others in my situation to pay our loans throughout the Pandemic, when all others were not required to do so, but it does not seem that this inequity was addressed. During the Pandemic, I lost my photography business and my boyfriend of 48 years died from Covid. It was a hardship during the Pandemic to come up with my payment
        I’m happy that so many lives will be bettered by the Biden Loan Forgiveness Plan, but I’m really sad for those who have been left out by the September 29th new ruling. Equally, we all suffered and lost footing during the Pandemic. This is incredibly unfair and depressing for them, especially as there was no warning that the date would be changed.

      • Great point, Natalie. It sounds like you had commercially-held federal loans, based on the fact that you were required to make payments. Unfortunately, I think its highly unlikely that you ever see a refund for those payments.

        It is much easier for the government to refund payments that were made to the government. Refunding payments made to a private company isn’t something the Department of Education will pursue.

  2. This is interesting. On the Student aid website, it says that the borrower had to have a balance “as of June 30,2022”. I paid during the pandemic and paid off the loan in April with a refinance to a private lender as interest rates were way better than anything the government had. Fedloans says that since I did not have a balance “as of” June 30, even if I get a refund on the payments I made, I would not qualify for the Biden forgiveness program. So if that is true, then getting a refund may not be beneficial unless they paid off the loans after June 30.


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