How to Get Refunded on Federal Student Loan Payments You Made During the Pandemic
If you are a cash-strapped federal student loan borrower, consider asking for refunds if you made additional payments after March 13, 2020, when the CARES student loan moratorium was imposed. The only compromise is that you will refuse to repay the loan, but it may be worth it if your circumstances change and you first want to top up your emergency fund or pay off the debt at a higher interest rate.
It’s your money until the moratorium expires
Under the CARES Act, passed in March 2020, interest on student loans was frozen and payments for federal borrowers were suspended. This extension has been extended twice, and it currently expires on September 30, 2021 (no other extension has been specifically mentioned, so perhaps this is finally the real end date of the moratorium).
But what if you paid the surcharge anyway? Well, according to the Federal Student Aid website , “Any payment you make during the suspension of payments (starting March 13, 2020) may be refunded. Contact your loan agent to request a refund. “
(However, the loans that are eligible for this return must be Department of Education loans, which means that federal Perkins loans and federal family education loans do not count as these programs are not run by the state.)
How to request a refund
According to Forbes , you will need to compile a report of all payments you made during the abstinence period, showing the creditor, the amount paid, and the date the payments were processed.
Then visit the lending institution’s website and look for a COVID page or banner that should provide more information on how to request a refund. Once you have made a request, ask them how long it will take and create a calendar reminder to check your bank account after that date. Just remember that when the moratorium period is lifted, you will still be in arrears on the loan and interest will be charged again.
When is a refund request a good idea?
Of course, there is nothing wrong with paying off the outstanding loan balance by making additional payments during the moratorium. But the point is, you don’t need it either. And if you suddenly find yourself in desperate need of cash, getting your student loan payments back is a better option than relying on a credit card or personal loan, which can be charged 10-20% interest rates higher than 0% in currently charged on your student loans.
Tricia Tetro, Senior Financial Analyst at FitSmallBusiness explains to Student Loan Planner:
“Those in need of funds often turn to loans and credit cards to supplement their cash flow. While these financial resources are useful, they come at a price. If the reimbursement amount of your eligible student loan allows you to avoid additional debt, you may want to request reimbursement. “
Refunds can still be a good option, even if you’re not desperate for money. As we pointed out in previous Lifehacker posts, you can delay paying off your student loans until the debt forgiveness is clearer (or at least until the $ 50,000 forgiveness for all issue is resolved) borrowers) and use that money elsewhere – to increase the size of the emergency fund or even increase your retirement savings , as the long-term benefits may outweigh the benefits of making multiple payments on the low-interest student loan.