What if you just paid off your federal student loans? Or did he pay for them?


President Joe Biden announced Wednesday that he is canceling up to $20,000 in debt for current or former students who received Pell grants to attend college or up to $10,000 for people at certain levels of income with other federal student loans.

This is a life changing announcement. Nearly 90% of scheduled debt forgiveness for those no longer in school will go to borrowers earning less than $75,000, the Biden administration said, noting that the cost of a four-year college has almost tripled since 1980, even taking inflation into account.

But what does the announcement mean if you’ve recently paid off your federal student loans? How about paying them back? Are you still eligible for some sort of student loan forgiveness under Biden’s plan?

There is good news and bad news.

If you made payments after March 13, 2020, you may be eligible for a refund

The bad news: If you repaid your federal student loans before March 2020, you shouldn’t qualify for this federal student debt relief. More details on how Biden’s loan forgiveness plan will work are expected to be released soon, but the plan only applies to current student debt holders.

“I haven’t seen anything to indicate that if you repaid your loans you would be eligible for a rebate,” said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a nonprofit trade association.

There is, however, a repayment opportunity for student loan repayments made after March 2020. The COVID-era policy in place allows borrowers this opportunity, according to the Department of Education.

“You can get a refund for any payment (including direct debit payments) you make during the payment break (starting March 13, 2020). Contact your loan officer to request a refund of your payment,” says the Federal Office of Student Aid (FSA) website.

To demonstrate how these repayments work, Buchanan gave the example of a borrower who made a lump sum payment of $1,000 in June 2021, bringing their balance down to $8,000, and now wants a repayment for that payment. The loan officer should say, “Great. Your current balance is $8,000. We will send you a check for $1,000 and then your loan balance will increase to $9,000,” Buchanan said.

But what we don’t yet know is how Biden’s student debt relief plan will affect those payments made during COVID. Buchanan said when the government chooses to review loan balances for the forgiveness plan could potentially affect whether or not requesting that refund could maximize any loan forgiveness if you qualify.

Typically, the Department of Education determines loan forgiveness recipients, “but that forgiveness is based on what your balance was on X date,” Buchanan said.

“Let’s say they choose July 1, 2022… [They will say] “Servicer, tell me what their pay was on that date?” “And that’s how much forgiveness you’re going to get,” he added.

In this scenario, if you owe $10,000 and are requesting a refund of $2,000 on pandemic-era payments today, after this hypothetical date and you have increased your loan balance to $12,000, only $10,000 of that loan can be forgiven.

In this case, “That repayment didn’t do anything to give you more money, it just put it in your hands rather than in a loan,” Buchanan said. But he warned the Department for Education could go in a different direction which would allow borrowers to get a refund and their loans are written off entirely, in which case they could actually “make money out of it,” he said.

That’s why Buchanan’s advice to borrowers is not to seek reimbursement for any pandemic-related payments until the Department of Education releases more information on exactly how it will interact with the plan. Biden loan cancellation. Unless, of course, you need the refund money in your pocket right now.

“If you need that money because of expenses or because you lost your job, then absolutely ask for it,” he said, noting that this is the type of pandemic-related flexibility for which the policy was created. “But if you get there and say, ‘I want to get more loan forgiveness. I’m not sure this is the right strategy until we get more advice,” he added.

In the meantime, keep your information up to date with your loan officer. “Your loan manager is the only person who can give you loan forgiveness, no one else can,” Buchanan said.

You can find your loan officer by pulling up your latest student loan billing statement and calling the number listed there, he said.

Beware of people posing as the Department of Education or your loan officer, or people claiming to give you loan forgiveness for an expedited fee.

Every time there’s been an ad about an extension or a discussion about forgiveness these scammers come out, call people, leave voicemails, put on all these websites that “help” people access these programs free,” said Tony Aguilar, CEO of Chipper, an app aimed at helping student borrowers understand and manage their debt. ”And often they charge people hundreds of dollars.

If people ask you for money upfront, or a monthly maintenance fee, your FSA ID username or password, those are signs of a scammer, Buchanan said. “Part of having a federal student loan is that you get free customer service,” he added.

If you’re still not sure who your loan officer is or need further assistance, you can get help by logging into your Federal Student Aid account dashboard and navigating to the “My Loan Officers” section, or you can call the Federal Student Aid Information Center. at 1-800-433-3243.


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