Patricia Young made the last payment on her daughter’s federal student loans on August 8.

Then, on August 24, President Biden announced a one-time rebate program that will erase up to $10,000 in federal student loan debt and up to $20,000 for Pell Grant recipients for those earning 125 $000 or less per year, or less than $250,000 for married couples.

Young, of Clinton, Md., has no regrets about repaying the loans.

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She took advantage of the payment breaks enacted during the pandemic to repay $12,000 in interest-free loans. Although there were talks at the time about loan forgiveness, Young said she wasn’t waiting to see if it would happen.

“I just said, let me keep throwing money at the debt and reducing it.”

Young’s daughter graduated from University of Maryland Baltimore County in 2019 and did graduate work at the American Musical and Dramatic Academy in New York, where he graduated last year.

Like many other borrowers who could afford to continue making payments, Young saw a tremendous opportunity to aggressively pay down her daughter’s college debt. Despite the pause, more than 9 million borrowers with loans held by the Department for Education made payments between April 2020 and June 2022, according to a spokesperson for the Department for Education.

Now that the loan cancellation plan has been announced, some regret their aggressive deleveraging. They are taking advantage of a loophole allowing them to recoup their payments and put the repaid loan amount back on the books of lenders so they can then apply for a forgiveness under Biden’s plan.

What borrowers think of Biden’s student loan forgiveness plan

While they took advantage of the zero rate relief, these borrowers now want to benefit from this new loan forgiveness.

It could work like this. Let’s say you paid $10,000. You call your loan manager and request a refund for the $10,000. You get the money back and your loan is reinstated to $10,000. Then you apply for a pardon under the Biden program.

What people are doing is technically allowed. Borrowers have one year to request a refund of payments made during the payment break which began on March 13, 2020, according to the Ministry of Education.

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What kills people is how student loan interest can add to the loan balance over time. Interest that is not paid through forbearance or deferral is added to the principal and then interest is charged on the new larger balance.

Each time the government has extended the student loan suspension program, Young said it allows him to repay more principal. She decided to pay $300 per pay period, or $600 per month. Since the interest rate on the loans was zero percent, all of his payments went directly to reduce the principal of the loan.

After her two July payments, the balance had fallen to $208.18, which she paid in August.

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Young said she had previously received covid emergency assistance.

“The only good thing that came out of covid was that they suspended interest payments,” she said. “Well, that gave me time to pay the money back.”

Many people requesting repayments in an attempt to take advantage of Biden’s loan forgiveness are not experiencing financial hardship. They didn’t lose their jobs during the pandemic. They had more disposable income because the pandemic shutdowns reduced their spending on restaurants or other discretionary spending, freeing up cash to pay off their loans.

Calculate the amount of your student loan that can be forgiven

As my grandmother Big Mama used to say, you can be right and you can be wrong.

Should you take advantage of the refund loophole?

Yes, ask for a refund if you really need it.

But, as a taxpayer who will foot the bill for this new loan forgiveness, I appreciate Young’s decision.

“My daughter used the money to go to school. She got a degree. I don’t really feel like I should even go through the process of trying to take advantage of the relief they’re giving people now,” Young said. said. “I could repay the money, and it was a blessing that I was able to do that. I was in the financial position to be able to repay it.

By the way, just because you’ve made payments and are asking for a refund doesn’t mean your loan can be forgiven.

“They should still meet the lower income threshold of $125,000 for individuals or $250,000 for married borrowers,” the Department of Education spokesperson said.

Biden’s student debt plan fuels broader debate over borrower forgiveness

There is so much talk about Biden’s loan cancellation plan. Some people are bitter that borrowers are getting their loans forgiven. Others feel that forgiveness is right after struggling for years under oppressive debt.

Young is sensitive to both points of view. She may not get everything she deserves, but she is happy with the relief she has received.

“For those who qualify and will have some of their debt forgiven, I couldn’t be happier for them because I know what it’s like to have some of that burden removed from your budget,” said Young.

“The forgiveness is a good start but, in my opinion, the whole student loan process needs to be revamped so that payments don’t become such a burden. But that’s another conversation for another day.