Federal Student Loan Refunds in Forbearance

The steps to get a refund for payments made in forbearance for federal student loan. If you paid federal student loan payments before the outbreak before finding out you qualify to receive debt forgiveness, you are likely to be able to ask for an amount of money back through the loan servicer.

Student loan repayments for federal students were suspended in the wake of the COVID-19 epidemic in March 2020. 

The interest rate is set to zero, which gives intelligent borrowers a chance to make only principal payments towards their student loans. 

One in five federal student loan borrowers – which includes me – took Advantage of the opportunity to decrease their debt balances in COVID-19’s forbearance period, as per the recently released analysis of the Federal Reserve Bank of New York.

However, things changed with the 2020 presidential election as former presidential candidate Joe Biden campaigned on federal debt forgiveness for students. 

Biden became president in January 2021, and student loan borrowers faced a dilemma: 

Do I want my student loans to be cancelled or to continue paying off the principal amount?

The final answer was announced in August 2022 when the Biden administration announced that it would pay off up to $10,000 of student loans that are federal debt for those with low middle-income borrowers or up to $20,000 to Pell Grant recipients. 

At the time, specific student debtors, including myself, have paid their balances on loans well less than the amount.

In my situation, I could reduce the federal loan from $11,476 down to $6,400 during my pandemic forbearance. 

When I found out that I was eligible for $10,000 worth of loan forgiveness, I began to consider whether I was just out of luck with the extra $3,600 or if there was any method to get an amount of money back for the difference. 

With the help of other internet-savvy sleuths, I discovered an answer to my query via the Federal Student Aid website:

Refunding Federal Student Loans during Forbearance

Before I was too excited about the possibility of the federal student loan refund, I was cautious about my expectations. 

My personal experience has taught me that it takes work to handle federal servicers for student loans, especially when your loans are transferred to a different servicer in the month of December 2021. Despite my reservations, I got my refund of $3,600 in just a couple of hours. Here’s how you can do it, too:

  1. Determine Whom to Contact

The steps to request an amount of money back for student loan repayments that were made during forbearance appear straightforward enough: Call the current Federal student servicer. You can determine the name of your servicer by accessing your account and dashboard via the FSA website.

  1. Gather Information

Before calling your service provider, it is crucial to have essential details. 

Here are the things you’ll need:
  • The number on your account. If your loans were transferred to another service provider during the pandemic, you’d need the account number of your previous and current loan servicers.
  • Payment details. Record the amount and the date for every payment you made from March 2020 until the present. Because I settled my debt via two different servicers, 
  • I needed to search through my personal and bank documents to locate the complete details regarding my payments. You may require similar.
  • The amount you will receive back. Take the balance on your current loan from $10,000 or $20,000, depending on your specific circumstances. 
  • In my instance, I’m eligible for an amount of $10,000 for student loan forgiveness. 
  • My total loan amount is $6,400. Therefore, I asked for the amount of $3,600. Remember, only loans that have been paid during forbearance qualify to be refunded. 
  • There is no reimbursement for loans made before March 2020.

It should be obvious. However, ensure that your income meets the requirements to be eligible for loan forgiveness before going through the hassle of asking for an amount. 

In particular, your personal income should be at most 125,000 dollars (or 250,000 for couples married). 

If you were able to make payments during the outbreak and your balance on the loan exceeds the threshold for the forgiveness of $20,000 or $10,000, you are eligible to request reimbursement. 

However, you’ll still need to pay any amount that is higher than the amount of forgiveness.

Additionally, private student loans aren’t eligible to meet the requirements to qualify for Federal student loan forgiveness.

  • Make the Call (and Wait on Hold)

When you call the federal student loan provider, you should take note of the conversation in detail, including the time and date of your call and the name of any person you spoke to. 

The representative should provide you with a refund for the amount you owe until your loan amount is at the expected amount of forgiveness, which is usually 10,000 or $20,000. 

Be prepared to be for an answer – it took me around 50 minutes to get in touch with Advantage’s customer service department. Aidvantage.

If you’ve made payments to the same company during the entire pandemic, asking for an amount of money back should be simple. 

However, if you’re like me, and the loans you owed were transferred to another servicer at the time of the payment pause, it could be more difficult. 

It’s because the current servicer might need to have all the information regarding the transactions you made with the previous servicer.

In my situation, I made payments to two servicers in the forbearance period, which was $3,576 for FedLoan Service (between March 2020 through the end of November in 2021) in addition to $1,500 paid to Aidvantage (from December 2021 until the now). 

My servicer initially needed help locating the $1,500 worth of the payments I made to Aidvantage. We needed to have a supervisor get involved in tracing my FedLoan payment history so that. 

I could ask for reimbursement for the total of $3,600 I due. The whole procedure took approximately two hours.

  • Keep an Eye on Your Accounts

Your responsibility is to inquire with your loan provider for specific information regarding the reimbursement. 

The Aidvantage representative advised me that I’d be reimbursed between eight and ten weeks, based on whether it’s a direct deposit or mailing the check. 

I called the company in August. 30and it could be some time before I can tell if my request was approved.

It is also essential to keep an eye on your balance in your student loan via your servicer’s online accounts portal, as the refund will be credited to your student loan balance. 

This means that you could see the balance of your loan change before when you get your refund. 

In addition, you may contact your loan servicer if you are waiting to see updates to your account in about a month.

  • Apply for Forgiveness

When you’ve received your money and your loan balance repaired, you’ll be able to pay off the remaining obligation through the federal program for student loan repayment. 

The application process is expected to start at the beginning of October. 

You can sign-up to receive the latest information about your borrower through the U.S. Department of Education website to be notified when the application opens.

For me, those two minutes I spent talking to my lender were worth the possible reward, which allowed me to be eligible for the total amount of $10,000 in student loan cancellation. 

If you’re interested enough to increase the potential for the forgiveness of student loans, contact your loan servicer as soon as possible. Keep in mind that a bit of patience and kindness will get you to the next level.

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