--- title: Trendy Student Loan 'Hack' Backfires on Borrowers After Biden’s Forgiveness Plan Fails description: Now that Supreme Court has rejected Biden's student loan forgiveness plan, borrowers who got refunds for certain payments are frustrated. authors: - name: Adam Hardy role: Lead Data Reporter url: https://money.com/author/adam-hardy/ bio: Adam Hardy is a lead data journalist at Money, where he frequently reports on financial barriers that affect low-income Americans. Adam’s work has also appeared in Business Insider, Forbes, Nasdaq, The Penny Hoarder, Yahoo! Finance and more than a dozen local and regional newspapers. education: University of South Florida, BA, Magazine Journalism at_money_since: 2021 articles: 501 covers: - Personal Finance - Banking - Business - Career Advice - Credit - Credit Cards - Debt - Economy and Politics - Education - Health and Wellness - Housing - Identity Theft - Insurance - Investing - Lifestyle - Loans - Mortgages - Pets - Professional Services - Retirement - Shopping - Taxes - Technology also_seen_in: - The Penny Hoarder - Forbes Advisor - Creative Loafing - The New York Times - The Washington Post - Bloomberg - Harvard Law School - The Federal Register - National Consumer Law Center - CBS News - Becker's Hospital Review - Business Insider - Mother Jones - The Week - Fortune - The Philadelphia Inquirer - National Association of Student Financial Aid Administrators (NAFSAA) - Education Advisory Board (EAB) - The Institute for College Access & Success (TICAS) - This Morning with Gordon Deal - Empower - Reddit social: - https://www.x.com/hardyjournalism - https://www.linkedin.com/in/hardyjournalism/ editors: - name: Julia Glum role: Managing Editor url: https://money.com/author/julia-glum/ bio: Julia Glum joined Money in 2018 and specializes in covering financial trends that affect everyday Americans' wallets. She also writes Dollar Scholar, a weekly newsletter that teaches young adults how to navigate the messy world of money. education: University of Florida at_money_since: 2018 articles: 453 covers: - Personal Finance - Banking - Business - Career Advice - Credit - Credit Cards - Debt - Economy and Politics - Education - Health and Wellness - Housing - Identity Theft - Insurance - Investing - Lifestyle - Loans - Mortgages - Professional Services - Retirement - Shopping - Taxes - Technology also_seen_in: - Newsweek - International Business Times - CBS News - Good Morning America - WUSA9 - Pix 11 - The New York Times - Mashable - The Washington Post - CNBC - Politico social: - https://x.com/superjulia - https://www.linkedin.com/in/julia-glum published: '2023-07-10T15:20:20.000Z' modified: '2024-01-10T15:00:35.000Z' section: Personal Finance tags: - News - Student Loans word_count: 945 canonical: https://money.com/student-loan-refund-hack-backfires/ type: NewsArticle source: structured-blocks --- > **Disclosure:** We research all brands listed and may earn a fee from our partners. Research and financial considerations may influence how brands are displayed. Not all brands are included. [Learn more](https://money.com/page/disclaimer/). ![People for student debt relief demonstrate in front of the White House](https://img.money.com/2023/07/News-popular-student-loan-hack-backfired-after-Biden-plan-rejected.jpg?crop=0px%2C174px%2C2880px%2C1620px&quality=85) Alex Dwan just wanted to be debt-free. Early in the pandemic, she was doing fairly well financially and decided to pay off her remaining $2,300 in [federal student loans](https://money.com/benefits-of-federal-student-loans-vs-private-student-loans/) ahead of schedule. For a little while, she enjoyed that elusive debt-free status. Then she took advantage of a trendy student loan “hack,” it backfired, and now — thanks to the recent Supreme Court decision [striking down](https://money.com/supreme-court-blocks-student-loan-forgiveness/) President Joe Biden's student loan forgiveness plan — 28-year-old Dwan is financially worse off. Once again, she's stuck with the debt, and [payments are restarting soon](https://money.com/when-do-student-loan-payments-resume/). She's not alone. [Data](https://fsapartners.ed.gov/knowledge-center/library/electronic-announcements/2022-07-13/federal-student-aid-posts-quarterly-portfolio-reports-fsa-data-center) from the Department of Education suggests at least 9 million borrowers are eligible for refunds for the payments they made at any point during [the student loan moratorium](https://money.com/cardona-confirms-student-loan-payment-pause-ending/) that's been in place since March 2020 (and is still in effect until the end of August). How many borrowers have actually received refunds remains unclear — but many of those who did were banking on forgiveness, leading them to use the cash for other expenses. Now that they're on the hook again, that refunded money simply isn't there anymore. “I was very frustrated that I was once totally debt-free, and now I will have this loan again,” Dwan tells Money. The refund wasn't intended to be used in this manner, according to Persis Yu, the deputy executive director of the pro-forgiveness nonprofit [Student Borrower Protection Center](https://protectborrowers.org/). Initially, the refund process was a lesser-known initiative tucked into the massive [$2 trillion CARES Act](https://money.com/coronavirus-relief-bill-checks-small-businesses/) passed in March 2020. At first, Yu says borrowers likely used it to get refunds for payments that were automatically withdrawn from their accounts as loan servicers scrambled to turn off payments at the start of the loan moratorium. Then a second usage — the so-called "hack" — emerged. After Biden announced his administration intended to forgive [student loans](https://money.com/student-loans/) last August, Yu says the refund provisions "gained new life." Last summer and into the fall, [many](https://web.archive.org/web/20220927123549/https://time.com/nextadvisor/in-the-news/biden-federal-student-loan-forgiveness-refund/) [publications](https://lifehacker.com/why-you-should-apply-for-a-student-loan-refund-before-f-1849563860) [started](https://www.cnbc.com/select/how-to-get-a-refund-for-federal-student-loans-paid-during-the-pandemic/) [highlighting](https://www.bloomberg.com/news/articles/2022-11-01/student-loan-refunds-checks-are-arriving-for-borrowers-who-pay-in-pandemic) the refund provision as a sort of loophole. The idea was that, since up to $20,000 of student loan debt was about to be forgiven, why shouldn't borrowers get back (and put to use) any payments they made when they weren't required to? Dwan says articles about the "hack" turned her on to the idea, but she was still hesitant to chase the refund. However, toward the end of 2022, she decided to take the plunge and request back her $2,300 to help pay for a move from [Chicago](https://money.com/best-places-to-travel/chicago-illinois/) to Brooklyn. The refund process, she recalls, was very simple. She made one phone call to her loan servicer, spoke to a representative who assured her she could get a refund and that the reinstated loan balances could ultimately be removed automatically under Biden’s initial forgiveness plan. Within “a month at most,” she says, she got her $2,300 and put it to use getting settled in New York. On top of [dealing with inflation](https://money.com/inflation-recession-fears-hitting-401k-contributions/), she found life in Brooklyn much more expensive than Chicago. The money burned quickly. Student loan borrowers who have been following the news know how this story ends. At the end of June, the Supreme Court struck down Biden’s plan to forgive up to $20,000 of federal student loan debt per borrower, thus nullifying the student loan hack. Dwan is back to owing the long-gone $2,300 that was once slated for forgiveness. ## Borrowers sick of being ‘yanked around back and forth’ Experts aren’t sure exactly how many borrowers are in Dwan’s shoes because the loan payment refund technique — while [outlined by the Department of Education](https://studentaid.gov/announcements-events/covid-19/payment-pause-zero-interest) — was not technically facilitated by the government agency. Instead, borrowers had to contact their student-loan servicer on their own, so the data is sparse. (The Education Department declined to go on the record after several requests for comment.) Given that at least 9 million are eligible for a refund *and* the refund-then-forgiveness technique was popularly recommended, it’s clear Dwan’s case isn’t an isolated incident. “Candidly, we promoted this as an option that folks can use, too,” says Yu, with the SBPC. “It seems like a reasonable choice at the time if the president is telling you that he’s going to cancel your loans — and they had a policy in place with an application.” With loan payments restarting as soon as October, folks like Dwan are scrambling to reorient their finances to accommodate payments they already made once in the past. It feels impossible, Yu says, for [borrowers to plan their finances](https://money.com/prepare-student-loan-payments-resume/) as the political fight over student loan debt rages on. For instance, even though the Supreme Court struck down Biden's first forgiveness plan, he immediately vowed he would [cancel an undetermined amount of student debt](https://money.com/student-loan-forgiveness-whats-next/) using a new legal path — and that the Education Department would be lenient with missed loan payments for the first 12 months. However, the new forgiveness plan is expected to face legal challenges and won't be in place by the time student loan payments restart this fall. "Borrowers have just been yanked around back and forth,” Yu says. Left to cope with the policy whiplash, Dwan says she feels misled. She emphasizes that she would have never pursued the refund without all the encouragement. “I'm already struggling. I'm walking dogs on the side on top of my full-time job, so it’s annoying and frustrating that I'll have another monthly payment,” she says. “It’s just another thing that I have to worry about, you know?” [Plan B: Biden Reveals New Student Loan Forgiveness Plan — Here's What Borrowers Can Expect Next](https://money.com/student-loan-forgiveness-whats-next/) [9 Easy Steps to Refinance Your Student Loan](https://money.com/how-to-refinance-student-loans/) [How to Pay Off Student Loans Fast](https://money.com/how-to-pay-off-student-loans-fast/) ```json { "@context": "https://schema.org", "@graph": [ { "@type": "BreadcrumbList", "@id": "https://money.com/student-loan-refund-hack-backfires/#breadcrumb", "itemListElement": [ { "@type": "ListItem", "position": 1, "name": "Home", "item": "https://money.com" }, { "@type": "ListItem", "position": 2, "name": "Personal Finance", "item": "https://money.com/personal-finance/" }, { "@type": "ListItem", "position": 3, "name": "Student Loan Debt", "item": "https://money.com/student-loan-debt/" }, { "@type": "ListItem", "position": 4, "name": "Trendy Student Loan 'Hack' Backfires on Borrowers After Biden’s Forgiveness Plan Fails" } ] }, { "@type": "WebSite", "@id": "https://money.com/#website", "url": "https://money.com", "name": "Money", "publisher": { "@id": "https://money.com/#organization" } }, { "@type": "WebPage", "@id": "https://money.com/student-loan-refund-hack-backfires/#webpage", "url": "https://money.com/student-loan-refund-hack-backfires/", "name": "Trendy Student Loan 'Hack' Backfires on Borrowers After Biden’s Forgiveness Plan Fails", "isPartOf": { "@id": "https://money.com/#website" }, "datePublished": "2023-07-10T15:20:20.000Z", "mainEntity": { "@id": "https://money.com/student-loan-refund-hack-backfires/" }, "inLanguage": "en-US", "breadcrumb": { "@id": "https://money.com/student-loan-refund-hack-backfires/#breadcrumb" }, "dateModified": "2024-01-10T15:00:35.000Z" }, { "@type": "NewsArticle", "headline": "Trendy Student Loan 'Hack' Backfires on Borrowers After Biden’s Forgiveness Plan Fails", "articleSection": "Personal Finance", "image": [ { "@type": "ImageObject", "url": "https://img.money.com/2023/07/News-popular-student-loan-hack-backfired-after-Biden-plan-rejected.jpg?crop=0px%2C174px%2C2880px%2C1620px&quality=85", "width": 1012, "height": 569, "caption": "News-popular-student-loan-hack-backfired-after-Biden-plan-rejected" } ], "author": [ { "@type": "Person", "name": "Adam Hardy", "url": "https://money.com/author/adam-hardy/", "@id": "https://money.com/author/adam-hardy/#author", "description": "Adam Hardy is a lead data journalist at Money, where he frequently reports on financial barriers that affect low-income Americans. 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