Borrowers Eligible for Debt Cancellation Will Receive Automatic Refunds on Past Payments, Per Updated ED Guidance

By Hugh T. Ferguson, NASFAA Managing Editor

According to a new FAQ from the Department of Education (ED), borrowers who made payments on their federally-held student loans during the pause on payments and interest accrual during the pandemic and meet the eligibility requirements for cancellation will automatically receive refunds of their past payments once their application is processed.

The announcement details that borrowers will “automatically receive a refund” for payments made during the payment pause, if they meet the following conditions:

  • The borrower successfully applied for and received debt relief under the Biden administration's debt relief plan, and

  • The borrower’s voluntary payments during the payment pause brought their balance below the maximum debt relief amount they are eligible to receive, but did not fully pay off their loan.

ED provides a detailed example of an instance in which a borrower will be made eligible for the automated refund.

“For example, if you're a borrower eligible for $10,000 in relief; had a balance of $10,500 prior to March 13, 2020; and made $1,000 in payments since then — bringing your balance to $9,500 at the time of discharge — we'll discharge your $9,500 balance, and you'll receive a $500 refund,” the FAQ explains.

The rollout of this automation is forthcoming, with an application expected to be unveiled in October.

In addition to the automated process, ED said that borrowers can also contact their respective servicers to receive refunds on “voluntary payments made after March 13, 2020,” but notes that such refunds will increase loan balances and monthly payments slated to resume in January of 2023. Borrowers have until Dec. 31, 2023 to request their refund.

Stay tuned to Today’s News for more updates.


Publication Date: 9/16/2022

Ben R | 9/23/2022 1:54:30 PM

It's clearly for political cover when they have to issue refunds to those who were perfectly willing and able to make payments.

Irene J | 9/17/2022 6:7:49 AM

Are Perkins loans held by schools included?

Maggie W | 9/16/2022 9:10:55 AM

If a borrower refinanced their federal student loans with a private lender during the payment pause, could they ask for a refund from the company and then somehow be eligible for the loan forgiveness?

Joseph T | 9/16/2022 8:13:41 AM

“voluntary payments made after March 13, 2020,” but notes that such refunds will increase loan balances and monthly payments slated to resume in January of 2023:
But can someone request a refund and then subsequently get those same loans forgiven?

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