How to Get a Federal Student Loan Refund Right Now

Editor's note: The Biden Administration has clarified that borrowers who made payments on their federal student loans since March 13, 2020 until August 28, 2023 can call or message their servicers and ask for a refund on any payments made. It appears that the FINAL DAY to ask for a refund on payments made on student loans during the pandemic is August 28, 2023. It's important that you take action before that date to receive a refund. You can also save a lot of money if you subscribe to our weekly newsletter for free updates.

After the pandemic first hit, a section of the CARES Act legislation initially put all federal student loan payments on pause until September 30, 2020, while also setting interest rates at 0%. The cutoff date for this benefit was extended multiple times through August 30, 2023.

Federal borrowers can save money by not paying student loans or continue making monthly payments to effectively pay down their principal balance faster at a 0% interest rate.

If you were financially secure and made a student loan payment any time after March 13, 2020, but find that your situation has changed, you might be eligible for a student loan refund. If you're interested, request a refund before August 28, 2023. Getting a refund can put money back in your pocket while rates are down and more cancellation is hopefully on the way.

Federal student loan refund eligibility

According to the Federal Student Aid website, “You can get a refund for most payments (including auto pay) you make from March 13, 2020, through Aug. 28, 2023. If you have a Direct Consolidation Loan, you can’t get refunds on payments you made before consolidating. Contact your loan servicer to request that your payment be refunded.”

So, if you made a student loan payment pre-pandemic or in the early stages, you’re eligible for a Department of Education refund. To qualify for refund eligibility:

• Loans must be federal student loans from the Department of Education (not private or a refinance loan).
• The loans must be owned by the U.S. Department of Education (more on that later).
• Payments made from March 13, 2020, up until August 28, 2023.

How to get a federal student loan refund

Initiating a federal student loan refund request through your loan servicer requires a few steps. Here’s how to get started if you qualify.

1. Identify the payments for the refund. Track down the payment amounts and their payment dates. Remember, they must be payments made between March 13, 2020 and August 28, 2023.
2. Gather your proof of payment. You might need to provide proof of payments to your servicer. This might be a payment confirmation email, a printout of your online student loan payments history or your bank account statement that shows the paid amount and date.
3. Contact your servicer. Tell your loan servicer that you’d like a student loan refund. You can say something like:

“Due to CARES Act student loans legislation, I’d like my student loan payments for [insert dates and amounts] refunded. If you have any questions or need any further information, let me know.”

Requesting a student loan refund is likely possible for any payments up to August 30, 2023, when the CARES Act forbearance expires and student loan repayment resumes. This deadline may come sooner if the courts rule on student loan relief earlier or if this extension is otherwise challenged.

Refund process and timelines

The payment amount will likely be a refund check or back to the original payment method, like a checking account. Ask your servicer where the refunded amount will be deposited and approximately how many business days the refund takes to process so you know what to expect.

The timeline can vary from one loan servicer to the next. However, if you're seeking a refund from MOHELA, you can expect the first check to arrive within 90 business days, and the rest within 60 days.

Also note that you'll likely receive multiple refund checks rather than a single refund. In one case, a client mentioned that their Department of Education account showed a full refund had been processed, but they had only received a $5,000 refund check instead of the $70,000 they were expecting. Based on MOHELA's guidance, they may not receive the rest of the refund for another two months.

When it makes sense to get a federal student loan refund

Making student loan payments during the coronavirus relief deferment period is a strategic way to get out of debt faster. Although it can be a smart decision for some borrowers, a federal student loan refund might be wise for a few reasons.

When you’re pursuing student loan forgiveness

If you’re pursuing student loan forgiveness and paid on your loan during the payment pause, you definitely want to get a federal student loan refund.

According to Certified Student Loan Professional™ and Student Loan Planner® consultant Meagan McGuire, borrowers who are going for forgiveness benefit from a student loan refund because these months of forbearance already count toward forgiveness under the CARES Act.

“There's no ‘extra credit’ for paying now,” said McGuire. “The goal of going for PSLF or IDR forgiveness is paying as little as possible to maximize the future balance forgiven, so getting that money back is optimal.”

If you’re working in public service toward Public Service Loan Forgiveness (PSLF), or are going for forgiveness through an income-driven repayment (IDR) plan, make moves to get a Department of Education refund.

If your loans will be forgiven anyway, there’s no reason to pay more than you have to. Current legislation under the CARES Act states that student loans are still in good standing even if you don’t make payments toward your loan balance. According to the language outlined in the CARES Act student loans legislation, these months of zero payments still count toward forgiveness eligibility.

When your financial circumstances worsen

Another good reason to get a student loan refund is if you’re struggling to pay bills.

According to Tricia Tetreault, a senior financial analyst at FitSmallBusiness, “If you’ve been directly financially impacted by the pandemic, and are struggling to meet your basic financial obligations, requesting a refund of your student loan payments could help you cover your immediate cash-flow gap.”

On top of that, if you’re turning to credit cards to help cover expenses right now because of unemployment, lack of income or higher expenses, opt for a student loan refund.

“Those that find themselves in need of funds often turn to loans and credit cards to supplement their cash flow. While these financial resources are helpful, they do come at a cost. If the amount of your eligible student loan refund will allow you to avoid taking on additional debt, you may want to consider requesting the refund,” said Tetreault.

Student loan refunds and private student loans

Unfortunately, you aren’t eligible for this CARES Act student loans legislation benefit if you have private student loans. Additionally, certain student loans not owned by the Department of Education aren’t eligible either.

Two categories of student loans are excluded from the payment pause and are not eligible for refunds: Federal Perkins Loans and Federal Family Education Loan (FFEL). These loans fall outside the scope of Department of Education ownership.

Perkins loans are owned and managed by college institutions, while FFELs are owned by private lenders and guaranteed by the federal government. If you have one of these types of student loans, talk to your loan servicer or schedule a consultation with Student Loan Planner® to see what options are available.

Should you request a federal student loan refund?

Contact your loan servicer if you have federal student loans and want to go for student loan forgiveness or need the cash you spent on student loan payments.

This type of legislation has been — in a word — unprecedented. Take advantage of this federal student loan refund opportunity if you need it. If you don’t, rest assured your loan funds are hitting the principal balance while interest rates are at zero.

And if you’re not sure if getting a refund is the right move, book a consult to review your situation with one of our student loan consultants. We’ll analyze your loans and financial goals to determine the best way to manage your student loan debt.