With President Biden's debt relief plan in legal limbo, borrowers who have been refunded the money they paid on their student loans are abandoning the plans they had for the extra cash.
Although the federal agency has offered to return money to people who continued to pay since the start of the moratorium in March 2020, the policy went largely unnoticed until Biden announced his debt-relief plan. At the time, the Education Department said eligible borrowers who paid off some or all of their debt during the pause could still qualify for cancellation if they met the income threshold — $125,000 per year or less than $250,000 for married couples.
The confirmation resulted in a surge in refund requests at the companies managing the federal government’s $1.6 trillion in student loans. Those student-loan servicers told The Washington Post in that they were inundated with tens of thousands of inquiries. The influx of requests resulted in a backlog at some student-loan servicers. Still, checks began rolling in for many borrowers in the past few weeks.Wilson received eight separate payments refunding her money in October. She had planned to use some of the funds to renovate her home and save the rest, but she is now resigned to start from scratch toward those goals.
“I put myself on a strict budget and was throwing every last dollar at that debt,” Wilson said. “The likelihood of having to return the money doesn’t really affect my financial plans too much, since I’m used to scrimping and saving. But I was really proud of seeing that $16,000 in my savings account. I’ve never had that much money put aside in my life.”
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