Student Loan Refunds: 90 Days Left for Certain Payments

Borrowers who faced challenges and errors in their accounts since the resumption of federal student loan payments have a chance to seek student loan refunds for payments made between October and December 2023, according to Business Insider.

The federal student loan payment pause, which concluded in September, led to a myriad of issues, including late billing statements and prolonged customer service wait times for borrowers.

In response to these challenges, President Joe Biden's Education Department identified mistakes in borrowers' accounts and instructed all servicers to place affected borrowers on administrative forbearance.

This forbearance, if correctly implemented, relieves borrowers of payment obligations and prevents interest accrual until their account errors are resolved.

However, some borrowers made payments before discovering their account was placed on forbearance.

Servicer Aidvantage has posted a notice on its website stating that affected borrowers have a 90-day window from the notification date to request student loan refunds for payments made during the October to December 2023 period.

Forbearance Periods and Student Loan Forgiveness Considerations

Ordinarily, forbearance periods do not contribute toward student loan forgiveness under Income-Driven Repayment (IDR) or Public Service Loan Forgiveness (PSLF).

The Biden administration, recognizing the unique circumstances, indicated that certain administrative forbearance periods related to billing errors or payment recalculations should be considered for loan forgiveness, Forbes reported.

An Education Department memo recommended granting credit toward IDR and PSLF for borrowers placed in administrative forbearance to resolve servicing errors.

However, it remains unclear whether all borrowers in administrative forbearance will receive forgiveness credit or only those identified with servicing errors.

Some borrowers reported receiving delinquency notices or bills despite being in administrative forbearance.

The Education Department clarified that borrowers are in a transitionary "on-ramp" period, during which missing payments won't result in penalties.

"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.

This means your account will not be delinquent, recent missed payments won't impact credit, and loans won't default or go to collection agencies.

Biden administration officials warned credit reporting agencies against penalizing student loan borrowers for missed payments during this on-ramp transition period.

For Borrowers with Delinquencies or Defaulted Loans

The fixes related to income-driven repayment plans do not extend to forgiveness or student loan refunds for borrowers with loans currently in delinquency or default, as per the Education Department.

However, under the "Fresh Start" program, available until at least September 2024, borrowers with delinquent or defaulted student loan debt can restore their standing when payments resume, Nerd Wallet noted.

Months spent in default typically won't contribute to IDR account adjustment.

Still, borrowers exiting default before the Fresh Start program concludes will receive IDR credit for months spent in default from March 2020 until the month they exit default.

After the Fresh Start period, only borrowers rehabilitating to exit default will benefit from the adjustment without receiving credit for periods in default during the payment pause, according to the Education Department's guidance.

This article is owned by Latin Post.

Written by: Bert Hoover

WATCH: Which student loan repayment plan is right for you - EXPLAINED! - From The Money Librarian