Student loan refund checks on their way to millions: Here's what to do if you don't benefit
A provision in the CARES Act set up protections for some student loan borrowers
Millions are getting student loan refund checks thanks to a CARES Act provision, but many don't qualify for any debt relief. (iStock)
As the White House’s student loan forgiveness program faces ongoing legal battles, refund checks are being sent to borrowers who made student loan payments during the COVID-19 pandemic.
The checks come after the CARES Act paused payments for federal student loan borrowers during the COVID-19 pandemic. During this time, federal student loan payments were paused and interest rates dropped to 0% as part of the pandemic relief package passed in March 2020.
"If you made voluntary payments during the payment pause (from March 13, 2020, through Dec. 31, 2022) and your current loan balance is below the amount of debt relief you’ll receive, after you successfully apply for and receive debt relief under the administration's debt relief plan, we’ll automatically refund the amount you paid during the payment pause (only up to the remaining amount of your eligible debt relief)," the Office of Federal Student Aid states on its website.
Still, about 9.1 million federal student loan borrowers have made at least one payment from April 2020 to March 2022, according to the Office of Federal Student Aid.
The pause is set to expire on December 31, 2022, following several extensions. Borrowers can contact their student loan servicers to request refunds, according to the Office of Federal Student Aid.
However, most federal student loan relief doesn’t apply to private student loan borrowers. If you have private student loans and are looking to reduce your monthly payment, you could consider taking out a loan refinance to lower your interest rate. Visit Credible to compare different student loan lenders, without affecting your credit score.
GOOD NEWS: PRIVATE STUDENT LOAN INTEREST RATES PLUNGE FOR 5- AND 10-YEAR LOANS
Biden administration says student loan payment pause won't be extended
Although federal student loan payments are currently paused and payments are optional, the Biden Administration announced in August the final extension of the "pause on student loan repayment, interest, and collections through December 31, 2022."
That means millions of borrowers will need to begin making payments once again starting January 2023. The average monthly student loan payment for recent graduates is $393, according to data from Credible. But more than half of student loan borrowers say they will not or may not be able to make payments when the pause ends, according to a study by Morning Consult.
If you have private student loans, they do not qualify for the federal student loan payment pause. But you can lower your monthly payments by refinancing. Visit Credible to compare multiple student loan lenders at once and find the interest rate that's best for you.
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Student loan forgiveness being battled in court
In August, President Joe Biden announced his plan to provide one-time student loan forgiveness of up to $10,000 to millions of borrowers, or up to $20,000 for those who used Pell Grant loans in college. To qualify, federal student loan borrowers must make less than $125,000 per year or $250,000 for married couples.
But that plan is currently being challenged in court. A federal appeals court on Oct. 21 issued a temporary block on the student loan forgiveness program as it considers legal challenges raised by six states: Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina.
Prior to this decision, a federal district judge dismissed the case, arguing plaintiffs did not demonstrate that the program directly harms their states. But the states appealed the decision. As the legal battle continues, the Biden Administration urged borrowers to keep applying for student loan forgiveness.
But if Biden’s student loan forgiveness plan goes into effect, private student loan borrowers won’t benefit. If you have private student loans, you can potentially reduce your monthly student loan payment by refinancing to a lower interest rate. Visit Credible to find your personalized interest rate in minutes.
BIDEN ADMINISTRATION REVISES STUDENT LOAN FORGIVENESS FOR SOME BORROWERS
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