How to Get a Refund of Student Loan Payments

Abigail Eun
Abigail Eun

Abigail Eun is a freelance writer and personal finance expert. Through diligent research and continuous learning, she has honed her knowledge in budgeting, saving, investing, and debt management. Abigail is passionate about helping people get their finances in order. She believes that everyone should have access to the information they need to make sound financial decisions. Her goal is to provide clear and concise information that is easy to understand.

See author page
September 19, 2022

Under President Biden’s latest student loan relief actions, millions of borrowers can receive a refund of any student loan payments made since the forbearance.

In fact, according to Federal Student Aid (FSA), “[borrowers] can get a refund for any payment (including auto-debit payments) you make during the payment pause (beginning March 13, 2020).”

Now, many federal student loan borrowers are requesting refunds for their payments to maximize their student loan forgiveness eligibility. If you are a borrower who is unsure of whether you qualify for a student loan refund, or if requesting a refund is the right decision for you, keep reading. 

Who Can Get a Refund? 

Whether you qualify for a refund of student loan payments depends on the loan type you have. Here is a list of which loans do qualify, and which loans don’t.

Loans that Qualify for a RefundLoans that Do Not Qualify for a Refund
Direct Subsidized LoansNon-Defaulted FFEL Loans Not Held By The U.S. Department Of Education
Direct Unsubsidized LoansFederal Perkins Loan Not Held By The U.S. Department Of Education
Parent Plus LoansNon-Defaulted HEAL Loans
Grad Plus LoansPrivate Student Loans
Direct Consolidation Loans
Federal Perkins Loans Held By The U.S. Department Of Education
Federal Family Education Loans (FFELs) Held By The U.S. Department Of Education
Defaulted FFEL Loans Not Held By The U.S. Department Of Education
Defaulted Health Education Assistance Loans (HEAL) Loans

Should You Apply for a Refund?

Whether you should apply for a loan refund depends on your financial situation. 

Recently, President Biden released his three-part student loan forgiveness plan that will cancel up to $20k for federal student loan borrowers who make less than $125,000 annually. If you have received a Pell Grant in the past, you are eligible for $20k in debt cancellation. Individuals who have not received a Pell Grant are eligible for $10k in debt cancellation. 

Apply for a Refund If…

You are eligible for Biden’s loan forgiveness and you have paid down your debt to an amount less than how much you qualify for in loan forgiveness.

For example, let’s say you are eligible for $10,000 in student loan cancellation. You paid down your balance to $9,000 during the COVID-19 payment suspension. If you request a refund, you will receive $1,000, bringing your balance back up to $10,000. Then, your balance of $10,000 will be wiped out with loan forgiveness. 

This way, you are maximizing your forgiveness eligibility while pocketing some cash. 

Don’t Apply for a Refund If…

You are not eligible for Biden’s loan forgiveness. 

If you do not qualify for loan forgiveness, you will not benefit from requesting a refund. 

You have not paid your debt down to be below the amount of loan forgiveness you qualify for.

If you do qualify for loan forgiveness, but have not paid your loan balance down to be lower than the amount you can have forgiven, you will also not benefit from requesting a refund.

For example, if your initial balance was $30,000 and you paid $5,000 during the forbearance, you will have a remaining balance of $25,000. Regardless of the amount of forgiveness you qualify for, neither will bring your balance to 0. In this case, requesting a refund of the $5,000 you already paid would not make sense.

Note: The Department of Education has yet to release more information about Biden’s student loan forgiveness. Until then, it is uncertain whether a student loan refund could impact your eligibility for student loan forgiveness. In fact, some experts have advised waiting until more information is released, as a refund may impact how much you are able to receive in forgiveness.

It may be wise to wait until additional information is provided before requesting a refund on your student loan payments, especially if you want to benefit from student loan forgiveness. 

How to Apply for A Refund

To apply for a refund, you will need the following information:

  1. The contact information for your loan servicer
  2. Your Social Security Number
  3. A list with the number of payments you’ve made since forbearance, the date the payment was processed, and the amount you paid
  4. Your billing address
  5. Bank information

First, you’ll want to call your loan servicer. Once you’re in contact with a representative, ask for a loan refund for payments made during the forbearance. 

Specify which loans you want a refund for, and be ready to share any information on your loan payments if necessary. Your loan provider may ask you for your billing address, social security number, and banking information. 

While you are on the line, be sure to ask your loan servicer about the estimated timeline for when you will receive a refund on your loans. After providing them with the requested information, you should be good to go. Your loan servicer will send a confirmation email that validates your loan refund request. 

How Long Will It Take for the Refund to be Issued?

The loan refund can take anywhere from six to twelve weeks to be processed. Check your loan statements proactively to track the status of your loan refund. 

If 12 weeks have passed since you have requested your refund and you have not heard back, contact your loan servicer to follow up. 

What to Use the Refund For

Once you’re confident that requesting a refund for student loan payments is a financially beneficial decision for you, consider using the extra cash to better your financial situation in another way. 

Pay off High-Interest Debt

Use the extra cash to pay off any high-interest debt you have, such as auto loans, private student loans, your mortgage, or any other form of debt. 

To prevent interest from accruing rapidly, put your extra cash towards the principal of the loan (the principal of the loan is the initial amount borrowed, not including the interest that accrued) – especially if your interest rate is in the double digits.

Contribute to Emergency Fund

Over 50% of Americans can’t cover a $1,000 emergency charge with the amount in their savings account. 

To be financially prepared in the face of an emergency, add the refunded money into your savings account. If you don’t have a savings account or are looking for a new place to store your money, consider opening a high-yield savings account (HYSA). A high-yield saving account allows you to earn interest on the amount of money that you have in your account without doing anything.

Pay Off Your Overdue Bills

If you have any payments or bills you need to catch up on, now is the time. Use the extra money to relieve your financial debts and cancel any overdue fees. 

Closing Thoughts From the Nest

Requesting a refund of student loan payments made since the COVID-19 forbearance is a win for many borrowers, especially in combination with student loan forgiveness. 

However, it’s important to note that President Biden’s student loan forgiveness plan is being updated regularly. Experts do not have all the answers yet, and staying up-to-date on any changes that may affect you as a borrower is crucial.  

You can subscribe to the Department of Education’s mailing list to receive email updates on any new changes on student loan forgiveness.

Dive deeper in student loans