Some student loan borrowers are starting to receive refund checks from the government, even as President Joe Biden’s forgiveness plan is tied up in court.

The government is sending money to borrowers who paid down their student loans after the pandemic pause took effect in March 2020, when interest rates fell to zero and payments were suspended. The checks are part of a little-known provision of the Covid-19 stimulus program that is getting new attention because millions of borrowers expect to have at least $10,000 in student debt forgiven. For many, it’s the first tangible sign that Biden’s plan is working.

Jason Gutierrez, a 33-year-old engineer in Greensville, South Carolina, graduated in 2011 with about $50,000 in student debt and had a balance of around $9,000 when the pandemic hit. He paid it off the last of it in December, taking advantage of the interest freeze to zero his balance.

Gutierrez was initially frustrated by the news that Biden was going to forgive debt, but was able to take advantage of a provision in the CARES Act that allows borrowers who want refunds on pandemic-era payments to ask for the money back. Gutierrez contacted Nelnet, his loan servicer, at the beginning of September and recently received 18 checks in the mail to cover the payments he made during the pause.

He plans to put the $9,000 toward an engagement ring for his girlfriend, and has applied to have the money forgiven as part of Biden’s plan.

“When Biden announced the forgiveness at the end of August, at first I was like, ‘Oh no, I just paid these off,’” Gutierrez said. “Then I was like, ‘Wait a minute, I still have a shot here.’ It’s a super good feeling.”

Payment Pause
Payments on student loan debt are set to resume Jan. 1 after several extensions. Under Biden’s forgiveness program, borrowers who make less than $125,000 per year — or $250,000 for married couples — are eligible to receive up to $10,000 in forgiveness, or $20,000 if they were a Pell Grant recipient. The forgiveness applications officially opened Oct. 17, and Biden noted four days later that 22 million people had already applied.

However, forgiveness is temporarily on hold while a federal appeals court hears a legal challenge to the plan from six Republican-led states.

Despite the pandemic pause, an estimated 8.8 million people made at least one payment between March 2020 and December 2021, according to a May paper by the Federal Reserve. That’s more than 40% of the roughly 20 million borrowers who were required to make payments before the pandemic freeze took effect.

People who paid during the pandemic can get that money back, and then apply for forgiveness if they’re eligible. Scott Buchanan, the executive director of the Student Loan Servicing Alliance, said that while servicers had seen a handful of requests for refunds through the pandemic, that number shot up in September.

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