Comment The companies that manage the Department of Education’s $1.6 trillion student loan portfolio said they are being inundated with refund requests from borrowers who made payments during the pandemic pause. The Department for Education has offered to refund people who have continued to pay since the moratorium began in March 2020, but the policy went largely unnoticed until last week. Borrowers began asking for refunds after President Biden said he would cancel up to $10,000 in federal student loans and up to $20,000 for Pell Grant recipients, people who earn less than $125,000 a year or less than $250,000 for married couples. Among the questions: What if they paid off their loans during the pandemic? Would they still qualify for cancellation? How would that work? Like this: Let’s say you paid off the $8,000 balance on your loan during the pandemic. You can request a refund of this money and then apply for debt relief to clear the ledger. That way, you can keep your $8,000 and cancel your loans. That is if you meet the eligibility criteria. Who is eligible for the new plan to cancel $10,000 in student debt? While most of the nearly 42 million people covered by the moratorium have not made payments since it began, about 9 million borrowers in good standing have continued to send money, according to the Education Department. Borrowers have one year to apply for a refund. The agency confirmed that eligible people who paid off some or all of their debt in the past two and a half years could qualify for cancellation if they meet the income threshold. But there’s nothing on the Department of Education’s website that says as much, which should give borrowers pause, said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group that represents companies that collect debt payments for the education. There is no guidance on the Department for Education website “about how refunds will work in relation to forgiveness. And since the government is still building this plane after it has already taken off, I think it is better to wait for official guidance,” he said. Buchanan said his members have received “a ton” of refund requests recently. Several student loan servicers put the number in the tens of thousands. Calculate how much of your student loan debt could be forgiven “The sudden renewed interest in these repayments is, in part, people having faith in the student loan system again,” said Michael Pierce, executive director of the Student Borrower Protection Center. He said the nonprofit spoke with borrowers early in the pandemic who tried to submit written requests refund and ignored. “I’d hate for service capacity issues to make a fool of everybody who tells people they can trust it,” Pearce said. Some payments made during the freeze were involuntary, resulting in the department continuing to garnish defaulted borrowers’ wages early in the pandemic. Some borrowers, particularly those working to erase public service loans, continued to pay because of mistrust. Others, like Gray and Lauren Cole, saw an opportunity to get out of debt without paying interest. The Gainesville, Ga., couple spent 2020 and 2021 paying off $40,000 in student loans Gray took out while studying kinesiology and ministry at Mississippi College. “We were lucky enough that even when we were in lockdown during Covid, we were able to work,” said Lauren Cole, 32, a user experience designer. “We had already worked hard to pay off our debts and we stayed committed.” When she learned of Biden’s cancellation plan, Lauren said she was happy for her friends who would benefit, but she certainly didn’t think she would be among them. That changed after he spotted a tweet from the Student Borrower Protection Center that encouraged people who made payments during the pause to request a refund. The nonprofit, which has advocated for debt forgiveness, told borrowers to apply for a refund before applying for forgiveness. Last Friday, Coles called Gray’s waiter, who said it would take six to 12 weeks to process the request and return $10,000 of the money they paid toward his debt. “It was a little shocking at first, especially how easy it was,” said Gray, an Army chaplain. “The woman just took out the bill and said, ‘Now you’re cleared to return the 10.’ We’re just going to try to pay it forward the best way we can with our community.”
