I have already paid off my student loan! Am I eligible for 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’ll no doubt see good news in the Biden administration’s proposed Student Debt Relief Plan.

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That’s five-figure good news, as you can land up to $20,000 to cash out current eligible balances.

But what if you’ve already paid off your loans? Can you redeem part of the federal loan forgiveness? The answer is yes – but it depends on a few important factors.

Forgiveness – for some

First of all, as with so many things in life and finance, timing is everything. If you have made or are making payments on eligible loans under the Forgiveness Program when the government suspended payment requirements and interest accrual (between March 13, 2020 and December 31, 2022), you fall within the window and qualify for one Forgiveness.

However, debt relief is only available for public loans, i.e. loans from the US Department of Education.

To be eligible for forgiveness, you must have made payments during the lockdown period and have an eligible government loan.

According to the Federal Student Aid website, certain qualifying loans include:

• direct loan

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

• Federal Perkins loans held by the government

• Federal Family Education Loan Program government loans

• Some defaulted loans

What to do if you have already paid off your loan?

Any borrower who used the payment and interest suspension during COVID-19 to pay off their debt can now request a refund. The refunded amount will appear again in your account as a loan balance.

According to the Department of Education, all you have to do is contact your credit service provider to request a refund.

Applications for loan forgiveness are expected to be received by mid-October. However, since it may take some time for the change to be reflected in your account, borrowers who want a refund of payments should consider starting this process soon.

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demand your forgiveness

Remember that the amount forgiven is limited to your debt — or owed until you pay it back during the break. For example, if you have an outstanding loan balance of $6,000 and qualify for up to $10,000 that will be canceled through the program, your $6,000 loan will be canceled and that’s it.

If you owe $13,000 and qualify for $10,000 that was canceled through the program, you now have a $3,000 loan balance after the forgiveness amount is applied.

But let’s say you cashed out the last $15,000 in your account before you knew you would qualify for $10,000 forgiveness. You can request a refund, but remember that if you reopen your account, you’ll need to start paying back that balance – with interest – once the hiatus ends on December 31st.

And since it can take months to seek forgiveness, you could be dependent on regular payments for that to happen.

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This article is informational only and should not be construed as advice. It is provided without any guarantee.