Student Loan Forgiveness: Paid Off Loan? You May Still Be Eligible For Up To $20,000 Refund

Some 43 million Americans will benefit from President Joe Biden’s plans to cancel student loans. Of those, some 20 million will see their debt wiped out completely.

The plan dismisses up to $20,000 in student loan for Pell Grant recipients and $10,000 for federal loan holders. To qualify, individuals need 2020 or 2021 income of less than $125,000 or $250,000 combined household income.

Applications for loan forgiveness will be available by mid-October and, once that is complete, the borrower can expect to see the loan adjustment in 4-6 weeks, before the scheduled payment restart of Dec. 31st.

Loan payments have been on hold since March 2020, the start of the COVID-19 pandemic. The debt relief plan only applies to borrowers who currently have a loan balance but any borrower who made a payment on their student loans since the start of the moratorium is eligible for a refund.

Borrowers are advised to contact their loan services to request their payment be refunded. To do so, eligible borrowers will have to request their balance be restored and then apply the forgiveness to that amount.

The amount of the relief is capped at the level of the outstanding debt, the department noted, so there won’t be a refund for the difference of the restored amount and the $10,000 or $20,000 allowed.