The Education Department just revealed that millions of federal student loan borrowers will receive refunds of payments as part of a sweeping new federal student loan forgiveness initiative.
The Education Department used an example to illustrate the new initiative: “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— [the Education Department will] discharge your $9,500 balance, and you'll receive a $500 refund,” reflecting the difference between the ending balance following the borrower’s voluntary payments made during the...
Other borrowers can still receive refunds of any payments made during the ongoing student loan pause, even if they don’t qualify for Biden’s student loan forgiveness plan. But these won’t necessarily be automatic. Those borrowers would have to specifically request refunds of those payments by contacting their loan servicer.
“Other borrowers can still receive refunds on voluntary payments made after March 13, 2020 by contacting their servicer,” according to the Education Department. “It's important to note that these refunded payments will increase your loan balance and your monthly payments. If you expect to have a balance after discharge is applied and wish to request a refund, you can do so by contacting your servicer until Dec. 31, 2023.
In addition, “If you consolidated your loan after March 13, 2020, refunds aren't available for any voluntary payments made prior to the consolidation,” according to the Education Department.The Biden administration has said that an application for the new student loan forgiveness initiative will be made available to borrowers on StudentAid.gov in early October, and borrowers
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