I recently took out a Direct Consolidation Loan to replace a defaulted Direct Consolidation Loan and put the new loan on the Income-Contingent Repayment Plan, under which I would currently be eligible to make no monthly payment, based on my present income. My reading of the Direct Loans website and the relevant sections of a couple of “help” books in the library led me to believe that I could do this. I applied for and received the new loan, and my defaulted loan was paid off. Now, several months later, they inform me that I shouldn’t have received the loan and that they are refunding it (their term) and returning me to default status. Can they legally do this? I applied for the new loan in good faith, made no misrepresentations on my application, and they approved it.