I already paid off my student loans!  Am I entitled to repayment and loan forgiveness?  Yes, up to K – but only under the 2 specific conditions

I already paid off my student loans! Am I entitled to repayment and loan forgiveness? Yes, up to $20K – but only under the 2 specific conditions

I already paid off my student loans!  Am I entitled to repayment and loan forgiveness?  Yes, up to $20K - but only under the 2 specific conditions

I already paid off my student loans! Am I entitled to repayment and loan forgiveness? Yes, up to $20K – but only under the 2 specific conditions

If federal student loans are on your mind, there’s no doubt you’ll see good news in the Student Debt Relief Plan proposed by the Biden administration.

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That’s the five-digit good news, because you can land up to $20,000 to pay off current eligible balances.

But what if you have already paid off your loans? Can you cash in some of your government loan forgiveness money? The answer is yes – but it depends on some important factors.

Forgiveness – for sharing

First of all, as with so many things in life and finance, timing is everything. With the forgiveness program, if you made or are making payments on eligible loans when the government suspended payment requirements and interest accruals (between March 13, 2020 and December 31, 2022) then you fall within the window and qualify you for forgiveness.

But debt is canceled only for public loans, meaning loans held by the US Department of Education.

To qualify for forgiveness, you must have made payments during the freeze period and have an eligible public loan.

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

  • Direct loans

  • Federal Family Education Loan (FFEL) Program loans held by the US Department of Education (pre-default and non-default)

  • Federal Perkins Loans held by the Government

  • Loans Federal Family Education Loan Program held by the Government

  • Some defaulted loans

What to do if you have already paid off your loan

Any borrowers who took advantage of the pause in payments and interest accruals during COVID-19 to pay down their debt can now request a refund. The refunded amount will go back into your account as a loan balance.

According to the Department of Education, all you have to do is contact your loan servicer to request the refund.

It is expected that loan applications will be available by mid-October. But since it may take some time for the change to reflect in your account, borrowers looking to repay payments should consider starting that process early.

Demanding your forgiveness

Keep in mind that there’s a limit to how much you’re forgiven – or owed until you’ve paid it off during the break. For example, if you have an outstanding loan balance of $6,000 and you qualify for up to $10,000 canceled through the program, your loan will be canceled for $6,000 and that’s it.

If you owe $13,000 and qualify for $10,000 written off through the program, you will now have a $3,000 loan balance after applying the forgiveness amount.

But let’s say you paid off the last $15,000 on your account before you knew you’d qualify for $10,000 in forgiveness. You can request a refund, but remember you’ll have to start repaying that balance – with interest – by reopening your account when the break ends on December 31.

And since it could take months for the forgiveness to take effect, you could be on the hook for regular payments until then.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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