Despite a legal challenge to its student loan forgiveness program, the federal government is reportedly sending refund checks for student loan payments that borrowers made during a moratorium on such payments during the pandemic.
The refunds are going to those who paid down their loans after payments were suspended in March 2020, Bloomberg reported Tuesday (Nov. 1).
A provision of the plan to forgive student debt allows borrowers to request refunds if they made payments during the pandemic, and about 8.8 million people made at least one payment between March 2020 and December 2021, according to the report.
The refunds are being made as part of the COVID-19 stimulus program and are the first tangible sign of President Joe Biden’s plan for forgiving student debt, the report stated.
Payments on student loans are to resume Jan. 1, with borrowers who have incomes below certain levels eligible to receive forgiveness for up to $10,000 on some loans or $20,000 on Pell Grant loans, per the report. However, a legal challenge from six states in a federal appeals court has led to this forgiveness being paused.
As PYMNTS reported in August, the cancellation of student debt may be a bit of a political football, but will likely be a boon for the paycheck-to-paycheck consumer, and by extension for the economy at large, because they will have more money in their pocket.
Read more: Student Loan Forgiveness Offers Cash-Strapped Consumers Breathing Room
About one-third of all borrowers would have their debt wiped out in its entirety, according to the Congressional Research Service.
Households in the middle-class income bracket owe an average of $43,090 in student loans, according to the Education Data Initiative.
Freeing up income would give some breathing room back to consumers who are living paycheck to paycheck, the number of which are growing in the U.S.
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