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Guide to Student Loan Refunds

What Is a Student Loan Refund?
Rebecca Safier
Rebecca SafierUpdated April 14, 2023
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In response to the Covid-19 pandemic, the government paused payments and interest on federal student loans in March of 2020. This emergency forbearance has been extended several times, most recently until as late as 60 days after June 30, 2023. Some borrowers elected to keep making payments during the pause to reduce their debt balance. But with President Biden’s announcement last summer of mass federal student loan forgiveness (which is currently on hold), borrowers who made payments these past couple of years may want a refund. Fortunately, the Department of Education is offering student loan refunds to borrowers who made payments on their federal student loans during the freeze. If that’s you, read on to learn about your potential options for getting your money back. 

What Is a Student Loan Refund?

A student loan refund is a return of the payments you made on your federal student loans during the student loan moratorium that’s been in place since March of 2020. For the past few years, the Department of Education paused federal student loan payments and froze them at 0% interest. It also halted collections on federal student loans in default. The latest student loan forbearance extension was announced on Nov. 22, and it has been extended until as late as 60 days after June 30, 2023. Although payments haven’t been required during this time, some borrowers kept paying down their debt. In fact, 9.1 million borrowers made at least one payment on their student loans between April 2020 and March 2022. Around 1.9 million borrowers paid off their debt in full. In August 2022, the Biden administration announced widespread federal student loan relief for qualifying borrowers. Specifically, those who are eligible could get up to $10,000 in loan forgiveness if they make less than $125,000 a year as individuals or less than $250,000 per household. If you received a Pell Grant in college, you could receive as much as an additional $10,000 in federal loan forgiveness for a total of $20,000. If you were one of the borrowers who paid off your debt during the moratorium (or reduced your balance to less than the $20,000 or $10,000 of loan forgiveness you may be eligible for), there could be recourse for you. You can request a refund of part or all of your payments so that you can maximize the amount you might receive in student loan forgivenessIt’s important to note that while the Department of Education opened its application for loan forgiveness for a short period last fall, it had to close it due to court orders. The initiative has been stalled while legal challenges play out, and the future of the loan forgiveness program remains uncertain at this time. Recommended: Student Loans: Should You Pay Them Off Early?

How Do Student Refunds Work?

Some student loan refunds will be distributed automatically. According to the Department of Education, it will automatically refund the amount you paid during the payment pause up to your remaining amount of eligible debt relief after you apply for and receive loan forgiveness. In other words, if you owed $12,000 in student loans and paid off $4,000 during the pause, and you’re deemed eligible for $10,000 in loan forgiveness, the government could refund you $2,000 so you get the full amount. If, on the other hand, your loan balance is higher than the amount of student loan forgiveness you could receive, the government won’t automatically refund your payments. You could still qualify for a student loan refund check, but you’ll have to request a refund from your student loan servicer. While the Department of Education is your student loan lender, your loan servicer is the company that manages repayment and refunds. You can find your loan servicer by signing into your Federal Student Aid dashboard. Common loan servicers include Nelnet, Great Lakes, MOHELA, and others. One thing worth noting when it comes to private vs. federal student loans: Payments on private loans are not part of the student loan refund.

Reasons You May Get a Student Loan Refund

If you’re eligible for Biden’s loan forgiveness and paid your student loan balance down to less than the amount of forgiveness you could receive, the government should automatically issue you a refund. That way, you could receive your full amount of forgiveness, rather than only receiving a portion of the amount for which you’re eligible and paying the rest out of your own pocket. Alternatively, if your balance is greater than the amount of loan forgiveness for which you’re eligible, you could still request a student loan refund of the payments you made during the freeze. For instance, you might ask for a refund if you’ve run into financial hardship or need the money to pay off medical bills or other expenses. In this case, you may need to call your loan servicer and request a partial or full refund of your student loan payments. Recommended: Student Loan Deferment: What It Is and How to Defer Student Loans

How Can You Get a Student Loan Refund Check?

To get a student loan refund check, you need to have certain types of federal student loans and meet a few specific conditions.

Requirements to Receive Student Loan Refund

You’re eligible for a student loan refund if you made payments on qualifying federal student loans on or after March 13, 2020. Qualifying loans include: 
  • Direct loans, including PLUS and consolidation loans that were held by the Department of Education
  • FFEL loans held by the Department of Education 
  • Federal Perkins loans held by the Department of Education 
However, you can’t receive a refund on these other types of loans: 
  • Private student loans 
  • Federal Perkins loans not held by the Education Department 
  • FFEL loans that are not held by the Education Department 
What’s more, student loan refunds are not available for payments made prior to consolidation that occurred after March 13, 2020. You also can’t get a refund for the final payment you made on a federal student loan before refinancing your student loan

Do You Have to Pay Taxes on Student Loan Refunds?

It’s unclear if you’ll have to pay taxes on student loan refunds at this point. Some states have said they will tax Biden’s loan forgiveness, if the initiative comes through for borrowers. States that say they will tax Biden’s loan forgiveness include Indiana, North Carolina, and Minnesota, among others. Keep an eye out for any developments on this issue so you don’t get hit with a surprise tax bill. 

How Long Will It Take to Get Your Refund?

The amount of time it will take to get your student loan refund will typically vary by student loan servicer. It may take six to 12 weeks for your refund to arrive. Your loan servicer may be able to share a more specific timeline when you make your student loan refund request. 

The Takeaway

If you paid down your student loan balance before President Biden’s announcement of student loan forgiveness, you could still be eligible for debt cancellation if the forgiveness plan moves forward. The Department of Education says it will refund payments made during the pause so that you receive the full amount of loan forgiveness you may qualify for. If you need some of your payments back to cover immediate financial needs, you could also reach out to your loan servicer to request a refund. The future of Biden’s loan forgiveness plan is uncertain, and it’s currently being blocked by court orders. If legal challenges succeed, the loan forgiveness initiative may not come to pass, so you might ultimately decide to pay that student loan refund back to your servicer. If the forgiveness plan is allowed to proceed, however, and you qualify, you may get the full amount of debt cancellation you are eligible to receive.

Frequently Asked Questions

Are they refunding student loan payments?
How does a student loan refund work?
Why did I get a federal student loan refund check?
Third-Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Photo credit: iStock/SDI Productions

About the Author

Rebecca Safier

Rebecca Safier

Rebecca Safier has nearly a decade of experience writing about personal finance. Formerly a senior writer with LendingTree and Student Loan Hero, she specializes in student loans, financial aid, and personal loans. She is certified as a student loan counselor with the National Association of Certified Credit Counselors (NACCC).
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