Paying off student loans is a major milestone for many. But some who requested refunds during the pandemic must now repay that money.
Gwendolyn Krantz managed to pay off her federal student loans during the pandemic, "I didn't want to be in any sort of debt.” But after President Biden announced his student loan forgiveness plan, she requested a refund for those payments.
In 2022, EdFinancial, her loan servicer, refunded her $13,381.92. Krantz planned on using it as a down payment on a house. However, last year, she received an email from EdFinancial saying she had to start paying her student loans again, along with interest.
"I was just like, where did this amount come from?" Krantz said, adding she tried to get answers from EdFinancial but was getting nowhere. "Nobody had an answer for me.” So she turned to NBC6 Responds for help.
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An EdFinancial representative told us they couldn't provide information about Krantz’ case due to privacy but would contact her to “discuss the issue raised.”
"I quickly got an answer. It was the refund money that they wanted back," Krantz said.
EdFinancial told her in an email, in part, that under the CARES Act, “…servicers were required by the Department of Education to honor requests for refunds for any payments during the payment pause.” Adding that Krantz's account balance was reinstated for the equivalent of the payments she requested to be refunded.
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Even though she qualified for that refund back in 2022, the Supreme Court rejected the President’s plan, and the payment pause ended. Therefore, she has to pay the money back.
Experts say she is not alone.
"Unfortunately, some people are currently running into that situation where they got a refund and now, they're struggling to pay it back. Now they've got to pay interest on it, and they're probably kicking themselves and wishing they didn't get the refund in the first place," said Jacob Channel, a student loan expert at LendingTree.
Channel stresses the importance of reading the fine print, explaining, "The government, when they refunded it to you, was not actively forgiving it. They were just sort of giving you the money with the idea that you knew that eventually pay back whatever you borrowed."
Krantz hasn't touched the money she got back. "Once again, I am in their debt. So, if I had known that it was going to be another loan, per se, I would have never taken the refund.”
If you're struggling to repay a pandemic loan refund, the Department of Education tells NBC6 the initial step for those facing difficulty is to immediately contact their loan servicer. Loan servicers can explain the range of options available, including enrolling in an Income-Driven Repayment (IDR) plan. These plans calculate your monthly payment based on your income and family size, making them more manageable based on your financial situation.
The Saving on a Valuable Education (SAVE) Plan is the most affordable program, it bases payments on a smaller portion of your adjusted gross income, offers forgiveness for borrowers who originally borrowed $12,000 or less after just 10 years, and includes an interest benefit to prevent the increase of loan balances from unpaid interest.
