If you are a federal student borrower in a financial crisis, you should seek a refund if you made additional payments after March 13, 2020 CARES Act student loan payment moratorium was established. The only downside is that you get back to focusing on paying back your loan. However, it can be worth doing if your circumstances have changed and you want to top up your emergency fund first or pay off higher-interest debt.
It’s your money until the moratorium expires
As part of the CARES law passed in March 2020, interest on student loan payments has been frozen and payments for federal borrowers have been suspended. This forbearance has been extended twice and currently expires on September 30, 2021 (not much has been said about another extension, so this could possibly be the true end date for the moratorium).
But what if you made additional payments anyway? Well after that Federal Student Aid website“Any payment you made during the suspension of payments (as of March 13, 2020) is eligible for a refund. Contact your credit servicer to request a refund of your payment. “
(Loans eligible for this refund, however, must be Department of Education loans, which means that Federal Perkins loans and Federal Family Education loans do not count as these programs are not run by the government.)
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How to request a refund
By ForbesYou want to keep a record of all the payments you made during the grace period listed by the lender, the amount paid, and the date the payments were processed.
Next, go to the loan servicer’s website and look for a COVID page or banner that has more information on how to request your refund. Ask them after the request how long it will be and create a calendar reminder to check your bank account after the specified date. Remember that after the moratorium period has been lifted, you will still owe the balance of your loan and interest will accrue again.
When is it a good idea to request a refund?
Of course, there is nothing wrong with repaying the outstanding balance of your loan through additional payments during the moratorium. But the point is, you don’t have to either. And if you’re suddenly desperate for cash, getting back into your student loan payments is a better option than relying on a credit card or personal loan that may come with 10% to 20% interest rates higher than 0% currently count towards your student loan.
As Tricia Tetreault, Senior Financial Analyst at FitSmallBusinessexplains to the Student Loan Planner:
“Those in need of money often turn to loans and credit cards to supplement their cash flow. These financial resources, while helpful, come at a cost. If the amount of your Eligible Student Loan Reimbursement allows you to avoid incurring additional debt, you should consider applying for the reimbursement. “
A refund can still be a great option even if you’re not desperate for cash. As we mentioned in previous Lifehacker posts, you may want to withhold student loan payments until there is more clarity on debt relief (or at least until the talk of a $ 50,000 forgiveness for all borrowers is resolved) and use that money elsewhere – to top up an emergency fund or You can even increase your retirement savingsas the long term gains could outweigh the benefits of some low interest student loan payments.
