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Should you ask for a refund on student loan payments?


(NerdWallet) – Hundreds of thousands of borrowers made payments on their federal student loans since forbearance began in March 2020, taking advantage of the opportunity to pay down their balances.

Now that the White House has announced plans to cancel up to $20,000 in student loan debt, some of those borrowers may be wondering how to get a refund. The idea is that a refund of student loan payments could put cash in borrowers’ pockets and maximize the amount of canceled debt — but that may not be the best idea for everyone.

Here’s what you need to know.

Who can request a refund?

More than 40 million borrowers were allowed to pause their payments, interest-free, during the pandemic. The White House says up to 27 million people may be eligible for debt cancellation.

Those who made payments or paid off their federally held loans during the interest-free forbearance — by single payment or lump sum — are eligible for refunds. Any payment made since March 13, 2020, is eligible.

Private student loan payments aren’t included. Neither are payments made on some FFELP or Perkins loans.

Who should request a refund?

Qualified borrowers who have loan balances less than their maximum cancellation amount — $10,000, or $20,000 if you accepted a Pell Grant — and have made at least one payment during the pause may be rushing to request a refund to ensure they get the most relief possible.

However, only borrowers experiencing financial hardship should request a payment refund at this time, says Scott Buchanan, executive director of the Student Loan Servicing Alliance.

Buchanan says that because full details of the loan cancellation program have not yet been released, borrowers can’t be sure they’ll actually benefit from getting a refund on payments made at 0% interest.

Just as the cutoff for cancellation-eligible loans is set for those disbursed before July 2022, Buchanan warns borrowers that the Education Department may decide to cancel debt based on a balance at a date in the past as well. In that case, any refunded payments won’t help borrowers maximize their cancellation amount.

“What I worry about is people potentially taking money out, spending it on something and then it doesn’t apply,” Buchanan says.

He advises borrowers to sign up for updates with the Education Department for official information on when to request a refund — and whether it will even be beneficial.

How do I request a refund?

Starting the process for getting a refund on payments is relatively simple if you have the right information handy. You need:

  • Your loan servicer’s phone number.
  • Your Social Security number.
  • Payment confirmation numbers or bank payment information.
  • The address where you want your refund delivered.

You can likely find payment confirmation numbers on your loan servicer account portal under your payment history. Each payment has a unique identification number that will allow the servicer representative to apply your refund accurately. You can find your bank transaction dates or check numbers on your bank account portal.

The first step is to call your loan servicer. Your loan servicer representative could ask for your Social Security number to pull up your account. After they verify your account and identity, let them know you want to request a refund on payments made during the interest-free forbearance period.

Expect long hold times, Buchanan says.

The representative will ask you which payments, specifically, you want refunded. To make this go quickly and smoothly, be prepared to provide them with the applicable payment confirmation numbers or transaction numbers.

You will also need to confirm your address on file: Refunds could come via check or electronically.

Then, the representative will submit the request on your behalf and provide you with a confirmation.

When will I get my money back?

If you don’t get your refund electronically, you will receive a check in six to 12 weeks. You will also see your loan balance increase by your refunded amount in that time frame.


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