I’ve already paid off my student loans! Am I entitled to a refund and loan forgiveness? Yes, up to $20,000 — but only under these two specific conditions

I’ve already paid off my student loans! Am I entitled to a refund and loan forgiveness? Yes, up to $20,000 — but only under these two specific conditions

If federal student loans are hanging over your head, you will undoubtedly see good news in the Student Debt Relief Program proposed by the Biden administration.

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That’s five-figure good news, as you can get up to $20,000 to pay off current eligible balances.

But what if you have already repaid your loans? Can you cash out some of the government loan forgiveness money? The answer is yes, but it depends on a few important factors.

Forgiveness — for some

First, as with so many things in life and finance, timing is everything. With the Forgiveness Program, if you made or are making payments on eligible loans when the government suspended payment requirements and accrued interest (between March 13, 2020 and December 31, 2022), you fall into the window and are eligible for the rebate.

But debt forgiveness is only available for government loans, that is, loans held by the US Department of Education.

To qualify for the discount, you will need to have made payments during the freeze period and have an eligible government loan.

Speak Federal student aid websitesome qualifying loans include:

  • Direct loans

  • Federal Family Education Loan (FFEL) program loans held by the US Department of Education (defaulted and non-defaulted)

  • Perkins federal loans held by the government

  • Loans from the Federal Family Education Loan Program held by the government

  • Certain delinquent loans

What to do if you have already repaid your loan

Any borrower who took advantage of the pause in payments and accrued interest during COVID-19 to repay their debt can request to be reimbursed now. The repaid amount will reappear in your account as the loan balance.

According to the Department of Education, all you have to do is contact your loan officer to request a refund.

Loan forgiveness applications should be available by mid-October. But since it may take some time for the change to reflect in your account, borrowers who want payments back should consider starting this process soon.

Claim your forgiveness

Keep in mind that the amount handed over is capped at what you owe – or due until you repay it during the break. For example, if you have an outstanding loan balance of $6,000 and you qualify for forgiveness of up to $10,000 under the program, your loan of $6,000 will be forgiven and that’s it.

If you owe $13,000 and qualify for $10,000 forgiven under the program, you will now have a loan balance of $3,000 after applying the forgiveness amount.

But let’s say you paid the last $15,000 into your account before you knew you’d be eligible for $10,000 back. You can request a refund, but keep in mind that by reopening your account, you’ll need to start paying off that balance – with interest – once the break ends on December 31.

And since it can take months for the rebate to apply, you might have to pay regular payments until that happens.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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