President Joe Biden announced that he would be canceling up to $20,000 in student loans for qualifying students. However, this action is currently blocked due to a court order. While many students think they have to wait until the court order is resolved to benefit from this opportunity, that’s not actually the case. It’s been reported that borrowers who made payments on their student loans during a specific time frame could get checks.
Understanding the Student Loan Forgiveness Checks
Within the student loan forgiveness plan that Biden announced, there is a specific clause that is very important. According to the United States Department of Education (ED), this clause says, “If you made voluntary payments during the payment pause (from March 13, 2020, through December 31, 2022) and your current loan balance is below the amount of debt relief you’ll receive after you successfully apply for and receive debt relief under the Administration’s debt relief plan, we’ll automatically refund the amount you paid during the payment pause (only up to the remaining amount of your eligible debt relief).”
So what is that clause trying to say? To put it simply, there were people who made payments within the specified timeframe of March 13, 2020, to December 21, 2022). Out of these people, only a certain few will be able to get an automatic refund. Those who have a current loan balance that is less than the amount of relief can qualify! This refund is only available after the individual was able to apply for (and qualify for) debt relief under Biden’s debt relief plan.
How Much is the Refund?
The specific amount of automatic refund that individuals will get depends on their current situation. However, the refund amount will be how much was paid during the specified timeframe. It’s important to keep in mind that the amount will only be up to the remaining amount of qualifying debt relief.
The ED provides an example! Let’s say that you qualify for $10,000 in debt relief. If you currently owe $9,500, that amount of relief will be applied to your loan (or loans if you have more than one). So if you paid $1,000 during the specific timeframe, you will automatically get a refund of $500. This $500 would be the last amount of your $10,000 debt relief.
What Timeframe is Important?
Only students who made payments within the specified timeframe can qualify. This timeframe is between March 2020 and December 2022. At least one payment must have occurred during this pandemic pause timeframe.
How Many People Made a Payment During the Specified Timeframe?
It’s estimated that 8.8 million borrowers made a payment during the paused pandemic timeframe for student loans. However, this number can increase since the time frame is until December 31st, 2022. That means there are plenty of people that could qualify for an automatic refund.
How to Claim?
All borrowers will need to do is submit an application for student debt relief. The application is available online on the ED website. The application deadline is December 31st, 2023.
Who Doesn’t Qualify?
Not everyone will be able to receive a refund, even if they made a payment within the specified timeframe. That’s because those who have a balance of more than the amount of debt relief they would have gotten won’t be able to get a check. The reason that borrowers wouldn’t get a refund check, is because the full debt relief amount would go towards any existing loan. Even with the debt relief, you would still have a remaining balance so there is nothing to refund you on. You can reach out to your loan servicer if you have any concerns.
What is the Student Loan Forgiveness That’s Blocked?
As we said earlier, currently the student loan forgiveness plan is blocked due to a court order. However, it’s still important that you know the basics of this opportunity especially since you could be due a refund. This plan consists of up to $20,000 in forgiven federal student loan debt. This forgiveness is only available to those within specific income limits for the years 2020 or 2021. The limits are:
- $125,000 for individuals
- $250,000 for households
However, those who meet the income limits won’t be able to qualify for the full $20,000 in forgiveness. Instead, they would only qualify for $10,000. Only borrowers that are Pell Grant recipients can qualify for the full $20,000 in student loan forgiveness. For borrowers that are dependents, the eligibility will depend on the income of their parents (not their own).
Are the Automatic Refunds Related to the $34 Billion That Was Canceled?
No! If you think that these automatic refunds are a part of the $34 billion in student debt that was canceled then that is not the case. It is important that you understand the difference! When it comes to the $34 billion that was canceled, this is referring to student loans that were a part of:
- Public Service Loan Forgiveness (PSLF)
- Permanent Disability Forgiveness
- Defense Claims Forgiveness
Public Service Loan Forgiveness (PSLF)
By making changes to the PSLF program, any remaining balance that borrowers have after 120 monthly qualifying payments will be canceled. Only those that work at a government agency at either the local, state or federal level can benefit. The deadline for this application passed on October 31st, 2022.
Permanent Disability Forgiveness
Borrowers who have an eligible disability can have their federal student loans canceled. The best part is that those who qualify don’t need to do anything to benefit. Instead, the determination will be done by seeing if the borrower’s data matches with the Social Security Administration (SSA) has on file.
Defense Claim Forgiveness
Not every educational institution is as legit as they like to make themselves seem. Some schools told students they have the right to file “borrower defense claims” with the ED. However, some schools were in violation of state laws. In this instance, borrowers could be eligible for some or total student loan cancellation.
There is a court order that is blocking the student loan forgiveness plan for up to $20,000 for eligible borrowers. However, there is still an opportunity for support. Qualifying borrowers who made a payment during the paused pandemic timeframe of March 13, 2020, through December 31, 2022, can get an automatic refund only if their current loan balance is less than the amount of debt that they would have gotten. If you want to benefit, you will need to fill out an application. Applications are free and the application deadline is December 31st, 2023. You still have time, and who knows, you may be able to benefit!