Student loan borrowers may be eligible for a refund of certain payments made, according to loan servicer statements. But only for a limited time.
Millions of borrowers were thrust into repayment in October following the end of the long-running Covid-era student loan pause, which had been in effect since March 2020. Loan servicers have struggled with the unprecedented return to repayment, with borrowers reporting billing mistakes and long call hold times.
Last month, the Biden administration ordered loan servicers to place borrowers into administrative forbearances so that billing irregularities and other errors could be corrected. During these forbearance periods, payments are not due. Biden officials indicated that at least some of these forbearance periods could count toward student loan forgiveness under Income-Driven Repayment plans and Public Service Loan Forgiveness. However, because of confusing communications from loan servicers and borrower uncertainty, some people have made payments anyway.
Now, borrowers may have a limited opportunity to ask for those payments to be refunded.
Student Loan Payment Refunds For Administrative Forbearance Periods
Some loan servicers are notifying borrowers that they can request a refund for any payments made during a recent administrative forbearance.
“If you were recently notified that your student loan account was placed into an administrative forbearance for the months of October through December 2023 OR October through January 2024, and you would like to have any payment(s) you made during these months refunded to you, you have 90 calendar days from the date shown on your notification to contact us to request a refund,” reads a message on the website for Aidvantage, one of the Education Department’s main student loan servicing companies. Other loan servicers may be offering similar opportunities.
Borrowers would have to contact their loan servicer to request a refund, however. And most (if not all) servicers are still experiencing long call hold times. “You may experience longer than normal wait times to speak with one of our representatives,” warns Aidvantage.
Similarly, “Due to the unprecedented event of millions of student loan borrowers returning to repayment at the same time, you may experience longer than normal wait times to speak to a Customer Service Representative,” said MOHELA — another department loan servicer — on its own website. “We appreciate your patience.”
Forbearance Periods Could Count Toward Student Loan Forgiveness
Normally, forbearance periods do not count toward student loan forgiveness under IDR or PSLF. The Biden administration, however, has indicated that some administrative forbearance periods associated with billing errors or payment recalculations should be counted toward loan forgiveness under these programs.
An Education Department memo released last month recommended that loan servicers be instructed to “grant credit toward Income Driven Repayment (IDR) and Public Service Loan Forgiveness (PSLF) for borrowers who were taken out of repayment status and placed in administrative forbearances to resolve these servicing errors.” However, the Education Department has not made clear whether all borrowers placed in an administrative forbearance will receive student loan forgiveness credit, or just those identified as having experienced a loan servicing error.
Student Loan On-Ramp Period Still Is In Effect
Some borrowers are also reporting receiving delinquency notices or bills, even while they are in an administrative forbearance and no student loan payments are due. Importantly, the Education Department has indicated that borrowers are still in the transitionary “on-ramp” period, during which people should not be penalized for missing a payment.
“During the on-ramp period (through Sept. 30, 2024), we’ll automatically put your loan in a forbearance for the payments you missed,” according to Education Department guidance. “Here’s what this means; Your account will no longer be considered delinquent and will be made current; Your recent missed payments will not lead to negative credit reporting; Your loans will not default and therefore will not be sent to collection agencies.”
Biden administration officials recently warned credit reporting agencies not to ding student loan borrowers for missing a payment during the on-ramp transition period.
Further Student Loan Forgiveness Reading
Major Student Loan Forgiveness Rule Change Is Just Weeks Away, And Could Pose Problems
New Student Loan Forgiveness Application Helps Borrowers With Medical Issues
How To Get Student Loan Forgiveness Under Expiring Biden Program