WASHINGTON–The “few” Americans who continued to make student loan payments during the pause on payments that was put in place during the pandemic will now be eligible for a refund, according to the federal government.
As CUToday.info has reported, President Biden has announced a broad federal student loan debt forgiveness plan that will provide up to $10,000 in loan forgiveness for people with annual incomes below $125,000 or couples with incomes under $250,000.
Those who received Pell Grants, a federal financial-aid award for students from low-income households, can be eligible for forgiveness of up to $20,000.
Borrowers are being told to contact their loan servicer directly regarding their status.
The student loan payment pause was announced in March 13, 2020, and was extended numerous times, including through the end of January 2023.
Automatic Refunds
Now the government is saying borrowers who made a payment after Aug. 24, 2022, that brought their balances below the $10,000 or $20,000 threshold for which they are qualified will have those payments refunded to you automatically.
The Wall Street Journal reported that just 1.2% of borrowers continued paying down loans as of March 2022, citing analysis from Mark Kantrowitz, a student loan expert. His estimate is based on repayment data released by the Education Department, the Journal said.
In all, some 37 million borrowers skipped nearly $200 billion in payments during the pause, the Federal Reserve Bank of New York estimated.
“When that payment is refunded to the borrowers’ student loan balance, they can then receive the amount of forgiveness for which they qualify, depending on if they meet all other criteria,” the Journal reported.
One-Third of Borrowers
As of the fourth quarter of 2021, some 32.3% of total borrowers had student loans with a balance of $10,000 or lower, according to estimates by the New York Fed, the Journal report added.
The announcements have left one group in a bit of a pickle: those who paid off their loan entirely during the pandemic. Kantrowitz told the Journal they will need to get on the phone to explore their options.