Student loan refund checks on their way to millions: Here’s what to do if you don’t benefit

Millions are receiving student loan repayment checks thanks to a provision of the CARES Act, but many do not 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 suspended federal student loan payments 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 break (from March 13, 2020 to December 31, 2022) and your current loan balance is below the amount of debt relief you are receiving, after you apply for and receive debt relief. under the administration’s debt relief plan, we will automatically refund the amount you paid during the payment break (only up to the amount remaining in your eligible debt relief),” the Office of Federal Student Aid states on its website.

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Still, about 9.1 million federal student loan borrowers made at least one payment between April 2020 and March 2022, according to the Office of Federal Student Aid.

The moratorium will expire on December 31, 2022, after several extensions. According to the Office of Federal Student Aid, borrowers can contact student loan agencies to request repayment.

However, most federal student loan relief does not apply to private student loans. If you have private student loans and are looking to lower your monthly payments, you might consider taking out a loan refinance to lower your interest rate. Visit Credible to compare different student lenders, without affecting your credit score.

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The Biden administration says the student loan payment pause will not be extended

Although federal student loan payments are now on hold and payments are optional, the Biden Administration announced in August the final extension of “the moratorium on student loan repayments, interest, and collections through December 31, 2022.”

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That means millions of borrowers will need to start making payments all over again starting in 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 won’t or can’t make payments when the break ends, according to a Morning Consult study.

If you have private student loans, they are not eligible for federal student loan deferment. But you can lower your monthly payment by refinancing. Visit Credible to compare multiple student loans at once and find the best interest rate for you.

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Student loan forgiveness is fighting 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 to 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 this plan is currently being challenged in court. A federal appeals court on October 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.

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Prior to that ruling, a federal district judge had dismissed the case because the plaintiffs had failed to demonstrate that the program directly harmed their state. But the states appealed the decision. As the legal battle continues, the Biden Administration has encouraged borrowers to continue applying for student loan forgiveness.

But if Biden’s student loan forgiveness plan goes into effect, private student loans won’t benefit. If you have private student loans, you can potentially reduce your monthly student loan payments by refinancing at a lower interest rate. Visit Credible to get your personalized interest rate in minutes.

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Have a question related to finances, but do not know who to ask? Email the Credible Money Expert at [email protected] and Credible can answer your question in our Money Expert column.

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