Should I Cancel My Student Loan Refund Now That Biden’s Forgiveness Plan Is on Hold?

G20 Biden, Bali, India - 16 Nov 2022
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The Biden administration’s one-time student loan forgiveness plan has been blocked by courts, leaving many borrowers to wonder what they should do with their student loan refund.

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A COVID-19 relief bill made it possible for borrowers who made payments on their federal student loans to request a refund. After Biden announced his plan to forgive up to $10,000 to $20,000 per borrower, those who paid down their balance below that limit during the payment pause requested to be reimbursed, Fortune reported.

But now that courts have halted the program, borrowers are unsure whether or not to spend that refund, hold onto it or apply it toward their student loan debt.

Jacob Channel, senior economist at LendingTree, told Fortune that borrowers should hold onto the refund they received for student loan payments made during the pandemic. Channel also suggested putting that money into a high-yield savings account until the courts make a decision. If Biden’s plan is blocked, then that money can go back toward student loan debt.

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“Because government-backed student loans aren’t collecting interest until repayments resume in January […] you don’t [need] to worry about spending money on your loans right now,” Channel explains. “Try to refrain from spending any of the money refunded to you, at least until we know for certain where forgiveness stands.”

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In an interview with WTTW, Lynne Baker, managing director of communications at the Illinois Student Assistance Commission, said that borrowers should start to prepare for payments to resume in January. They suggested looking into different repayment plans that are available and talking to your loan servicer to discuss your options.

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About the Author

Josephine Nesbit is a freelance writer specializing in real estate and personal finance. She grew up in New England but is now based out of Ohio where she attended The Ohio State University and lives with her two toddlers and fiancé. Her work has appeared in print and online publications such as Fox Business and Scotsman Guide.
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