But that plan took a turn as legal challenges threw Biden’s program into limbo. Now as the fate of the program rests in the hands of the Supreme Court, Wilson, 38, said she suspects she will have to return every dollar of her refund.
“It’s a good thing I saved all the money,” said Wilson, a state employee in North Carolina. “I was always a little skeptical [the debt relief program] would happen, and now I have no hope.”
With Biden’s student-loan cancellation policy up in the air, borrowers like Wilson who received refunds are abandoning plans of building their savings or buying homes, and they now are preparing for what many see as the inevitable demise of the president’s program. In interviews with a dozen borrowers, nearly all have stashed away their refunds in savings accounts, hoping to earn interest on the money before sending it back to the Education Department.
Many had hoped to maximize debt relief after paying off or paying down their federal student loans while payments were suspended. About 9 million borrowers in good standing kept sending money to the Education Department, while a majority of the 40 million people covered by the pause had not made payments in nearly three years, according to the department.
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 September 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. For the past few years, Wilson has aggressively paid down the $35,000 in student loans she acquired for a bachelor’s degree from the University of Mount Olive in North Carolina.
“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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