Understanding Student Choice Refunds: A Comprehensive Guide

The landscape of student loans can be ever-shifting, influenced by legal and legislative changes. This article aims to provide a comprehensive understanding of student choice refunds, including the reasons behind them, who is eligible, and how they are processed. It is important to note that the refund policy is determined by Texas Statute, not by the university.

Recent Developments in Student Loan Forgiveness

Recent developments may be welcome news for many Americans who have been subject to an ever-shifting landscape for student loans and rising monthly payments following legal and legislative changes. The reason for the refunds is related to student loan forgiveness.

The Education Department released new data indicating that more than 20,000 borrowers will be receiving student loan forgiveness under income-driven repayment (IDR) plans. IDR plans allow borrowers to qualify for a discharge of their student loans after they have made payments based on their income for 20 or 25 years.

Until now, only borrowers in the IBR plan had been receiving student loan forgiveness, as the department had contended that loan forgiveness under all other IDR plans was blocked due to court challenges. But the department, after making firm commitments in court filings to expand discharge processing for all IDR plans except for the SAVE plan (which remains blocked), was able to update its systems this month so that borrowers with student loans in ICR and PAYE could receive loan forgiveness, as well. A large batch of borrowers in ICR and PAYE, as well as others in IBR, received notices within the last two weeks that they qualify for a discharge.

Eligibility for Refunds Under IDR Plans

Thousands of borrowers who recently were notified that they qualify for a discharge under income-driven repayment, or IDR, plans may be reimbursed for excess payments they made after they reached their eligibility threshold for a discharge. And because many of these borrowers may have continued making monthly payments on their student loans long after becoming eligible for a discharge (without even realizing it), a sizable portion of these borrowers may be due for big refund checks. Here’s what borrowers should know.

There are two primary reasons why borrowers may be entitled to refunds of prior payments made under IDR plans:

Excess Payments: As a general rule, borrowers who receive IDR student loan forgiveness are entitled to reimbursement for any payments they made in excess of the 240 or 300 payments (the equivalent of 20 or 25 years) required to qualify for a discharge. The Education Department recently reaffirmed this in a court filing last October, when the department agreed to resume processing student loan forgiveness under the ICR, IBR, and PAYE plans.
“Any borrower who qualifies to have their loan discharged through an Income-Driven Repayment (‘IDR’) plan (which includes IBR, Original ICR, and PAYE) shall continue to be reimbursed for any payments made on the loan after the final payment that qualified them for a discharge,” says the court order.
Eligibility Thresholds: The Education Department confirmed in a more recent court filing that for now, only borrowers who reached IDR student loan forgiveness eligibility as of April 2025 or earlier are currently receiving a discharge of their student loans. The department indicates this is because of a ongoing court injunction related to the legal challenge over the SAVE plan, which the department indicates is interfering with its ability to count months toward IDR loan forgiveness across all plans, not just SAVE.
“Defendants focused on processing discharges for borrowers who became eligible for loan cancellation before April 2025, the month the district court expanded its injunction, while evaluating the most effective way to resume discharges for the borrowers who would have become eligible under the SAVE Plan Final Rule criteria after the date of the injunction,” explained the department in a January court filing. “Currently, the only cancellations taking place are for IBR borrowers who became eligible before April 2025. The same time limitation would apply to Original ICR and PAYE.”

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That essentially means that the more than 20,000 borrowers who were recently notified that they will receive student loan forgiveness under ICR, IBR and PAYE all reached their eligibility threshold before April 2025. Any of these borrowers who have continued to make payments on their student loans after reaching discharge eligibility (and many of them likely did continue to pay) would be entitled to a refund of all of those excess payments. For example, a borrower with monthly IBR payments of $400 per month who reached their 25-year discharge eligibility point in February 2025, but who has continued making those monthly payments since then, could receive a refund of $4,800 or more. The Education Department indicated that it will be able to start processing student loan forgiveness under IDR plans for borrowers who reached their eligibility threshold after April 2025 once the SAVE plan court injunction is vacated. That is expected to happen once the court approves the recent settlement agreement the department announced in December that would formally end the SAVE program.

Public Service Loan Forgiveness (PSLF) and Refunds

In addition to student loan forgiveness under IDR plans, the Education Department also announced that 18,160 borrowers recently received Public Service Loan Forgiveness, as well. PSLF allows borrowers to qualify for a discharge in as little as 10 years if they make qualifying payments on eligible federal student loans while working full-time for certain nonprofit or public organizations. Borrowers who receive PSLF, and who paid more than the 120 qualifying payments required to receive loan forgiveness, can also be reimbursed or refunded for those excess payments.

Refund Processing and Disbursement

Refunds associated with PSLF and IDR student loan forgiveness are typically processed at least several weeks after a borrower’s student loans have been officially discharged. Actual timelines can vary significantly, however, and it can sometimes take much longer for borrowers to receive their reimbursements. You have the option to choose how you wish to receive your refund.

Returning FSA Funds: A Detailed Guide for Schools

This chapter provides instructions for returning FSA funds for reasons other than the return of funds required when a student withdraws or otherwise ceases attendance during a payment period or period of enrollment (R2T4). (other than in its Perkins account). Please keep in mind that the excess cash rules must be adhered to once Title IV funds have been placed in the school’s federal funds account. Schools must return funds electronically using G6 except in unusual circumstances. If a school is required to return funds as part of a liability assessed in an audit or program review, it must follow the instructions provided by the issuing school participation division (discussed later in this chapter).

If a school is required to repay FSA funds due to a program review or audit, a copy of its final audit determination (FAD) letter or final program review determination (FPRD) letter is sent to the Accounts Receivables and Bank Management Group where an account receivable is established for the school. A payment instructions section will be included with the FAD and FPRD if the Department establishes liabilities to be paid through accounts receivable. Depending on the circumstances of the liabilities at issue, there could be additional methods by which the institution will be accountable for Title IV funds identified in the FAD or FPRD. It is important for the school to follow the payment instructions located in the FAD and FPRD. If the school needs assistance or has any questions, the school is encouraged to reach out to the lead reviewer and SPD.

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Returns of FSA grant funds (except FSEOG) and Direct Loan funds, other than funds not associated with a student that are being returned to stay in compliance with any excess cash requirements, must be offset by downward reductions to a student’s record in the COD System. program-, and award year-specific. same award year if it can disburse the funds within three business days. Schools should not use drawdown adjustments in G6 to make a refund of cash. If a school is returning cash as a result of refunds made to a borrower’s account, a corresponding downward disbursement adjustment must also be reported to the COD system. FWS account. that year is still open. In addition, as discussed in Chapter 2, schools must ensure that all unclaimed Title IV credit balance funds are returned no later than 240 days after the date it issued the first check. If an EFT to a student’s or parent’s financial account is rejected, a school may make additional attempts to disburse the funds, provided that those attempts are made no later than 45 days after the EFT was rejected (attempts cannot exceed the overall 240 day time frame). of the year in which a school submits its FISAP. in which case it is the Friday before. To submit a change request, a school logs in to the COD System and selects the appropriate FISAP from the FISAP Dashboard page. making and why. The Campus-Based staff will evaluate the school’s submission. school why its request was denied.

Please be advised that before submitting a refund via G6, the customer should notify their bank that they will be doing so as some banks will not release the funds unless notified in advance. Department of Treasury has mandated that all federal government agencies convert to using electronic payments. As a result, schools can no longer return Perkins funds by check.

Returning Funds from a Previous Award Year

From time to time, a school will have to return funds from a previous award year. Note: Federal Student Aid uses the term “return” for the process of sending money back to the program the funds were drawn from. Awards that are in the performance, liquidation, and suspension periods will appear under “Refunds.” When you are returning funds for an award year that is open, always return the funds to the program from which the funds were drawn. For the award in question, in the column “Refund Amount,” enter the amount you want to return. screen. If you believe the information on the summary screen is correct, select the “Submit Refund Request(s)” button to process the refund (return). If you’ve completed the process correctly, you’ll find yourself on the confirmation screen. From the confirmation screen, copy and save your tracking number.

Once an award year has closed (is no longer in the performance, liquidation, or suspension periods), a school will not be able to return funds to a specific program. However, a school can return funds even when a year is closed. To return funds from an award year that is closed a school uses the “Miscellaneous Refunds” tab at the top of the “Create Refunds” screen. To return funds that originated in what is now a closed award year, on the “Create Refunds” screen, select the tab “Miscellaneous Refunds” and click the “Continue” button. In the column “Refund Amount,” enter the amount you want to return. In the next column (“Bank Account”) select the account from which you want the funds drawn from the drop-down menu. In the column “Refund Type,” select the type of refund you wish to make from the drop-down menu. For example, if you are returning a Title IV credit balance that you have discovered was never delivered to the appropriate student, you would select “Closed Awards.” Once you have completed your entries, select “Continue” to navigate to the summary screen. If you believe information on the summary screen is correct, select the “Submit Refund Request(s)” button to process the refund (return). If you’ve completed the process correctly, you’ll find yourself on the confirmation screen. From the confirmation screen, copy and save your tracking number.

Identifying Loan Servicers for FFEL Program Loans

Loan (FFEL) Program loans from FFEL loan holders. To identify the current servicer of an FSA loan, access NSLDS and select “Aid.” Then identify the student and select “Loan History.” Under “Loan History,” the current loan will be listed at the top. Use the field “Servicer” to identify the organization to which you will be returning funds. Click on the servicer name to access the NSLDS Organizational Contact List page. Additional contact information for the loan servicers is available in the Knowledge Center under the “Topics” menu.

Understanding Withdrawal and Refund Schedules

It's crucial to understand the definition of withdrawal: Dropping all enrolled courses in a single term. Important Notice: Refund policy is determined by Texas Statute, not by the university. The refund will be based on the amount of tuition and fees charged. For example: A student enrolls in 15 hours at the start of the spring semester. DROPS one three hour course. The student has NOT "Withdrawn" from all courses in a single term.

Fall Session Refund Schedules

Fall Session 1 (15-Week Regular)
- By Sept. 10, 2025
- On or After Sept. 11, 2025
Fall Session 2 (5-Week)
- By Aug. 28, 2025
- On or After Aug. 29, 2025
Fall Session 3 (8-Week)
- By Aug. 28, 2025
- On or After Aug. 29, 2025
Fall Session 4 (5-Week)
- By Oct. 02, 2025
- On or After Oct. 03, 2025
Fall Session 5 (8-Week)
- By Oct. 23, 2025
- On or After Oct. 24, 2025
Fall Session 6 (5-Week)
- By Nov. 06, 2025
- On or After Nov. 07, 2025

Specific Session Examples (2025)

Session 1 (15-Week Session - Aug. 25 - Dec. 14)
- By Aug. 24: Full Refund
- Aug. 25 - Aug. 29: 80% Refund
- Aug. 30 - Sept. 08: 50% Refund
- Sept. 09 - Sept. 15: 25% Refund
- Sept. 16 - Sept. 22: 10% Refund
- On or After Sept. 23: No Refund
Session 2 (5-Week Session - Aug. 25 - Sept. 28)
- By Aug. 24: Full Refund
- Aug. 25: 80% Refund
- Aug. 26: 50% Refund
- On or After Aug. 27: No Refund
Session 3 (8-Week Session - Aug. 25 - Oct. 19)
- By Aug. 24: Full Refund
- Aug. 25 - Aug. 27: 80% Refund
- Aug. 28 - Sept. 02: 50% Refund
- On or After Sept. 03: No Refund
Session 4 (5-Week Session - Sept. 29 - Oct. 31)
- By Sept. 28: Full Refund
- Sept. 29: 80% Refund
- Sept. 30: 50% Refund
- On or After Oct. 01: No Refund
Session 5 (8-Week Session - Oct. 20 - Dec. 14)
- By Oct. 19: Full Refund
- Oct. 20 - Oct. 22: 80% Refund
- Oct. 23 - Oct. 27: 50% Refund
- On or After Oct. 28: No Refund
Session 6 (5-Week Session - Nov. 03 - Dec. 07)
- By Nov. 02: Full Refund
- Nov. 03: 80% Refund
- Nov. 04: 50% Refund
- On or After Nov. 05: No Refund

Example:

You withdraw during the 50% refund period.
- a) If you had paid $500.00 at this time, you would receive no refund. at this point in time.

Key Considerations

Administrative offices are not open on weekends.
Disbursement and refund schedules are important for refund processing.
NOTE - Definition of Withdrawal: Dropping all enrolled courses in a single term.

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