Did you know you could receive a student loan refund?
If your student loan exceeds the amount you owe the school for tuition and other expenses at the time of disbursement, you will receive a student loan refund. While it can be tempting to splurge on unnecessary expenses when you receive a refund check worth hundreds or even thousands of dollars – students must realize that money was given to them by the school to pay for educational expenses.
Use Your Refund to Pay For Existing Education Expenses
Financial aid offers aren’t generated at random. Your school calculated how much you needed in order to pay their Cost of Attendance, and then made you an offer equal to or lesser than that amount. Keeping that in mind, the first thing you should do with your student loan refund check is to determine how much you’ll need in order to pay for your necessary education expenses:
- Room and board*
- Books and supplies
*If you live on campus and have signed up for your school’s meal plan, your school most likely already took from your loan the amount needed to cover room and board. In addition to the items listed above, your school may have budgeted for additional expenses, such as household supplies, or money needed to take care of any dependents, such as children. Those educational expenses should take up the balance of your student loan refund check. If you received outside scholarships or funds from elsewhere, and still have money left over, there are still some wise things you can do with your refund.
Save your Refund Check For an Emergency
Just because you don’t have any urgent uses for your student loan refund now doesn’t mean you won’t have a need for the money later. Keep the money in your bank account in case of emergencies, such as a laptop breaking or a needed repair on a vehicle. None of us can predict the future, but we can prepare for all eventual outcomes. Learning how to save is a crucial skill as you prepare for life after college.
Invest Your Refund In Your Future
If you’re considering graduate school, you may want to invest some of your excess financial aid into a college savings vehicle, such as a 529 plan. A 529 plan is a tax-free savings vehicle that allows you to withdraw money for education expenses without penalty. And if you decide not to go to graduate school? You can pass your 529 plan onto a family member by naming them the new beneficiary.
Return Some Of The Refund
If you truly do not and will not need a portion of your student loan refund check, return that portion of the loan. You will eventually have to pay back your student loans, and you will have to do so with interest. The less you borrow, the less you’ll have to pay back after school.
How Will I Receive My Refund?
Each school has its own method of student loan refund disbursement, but there are three primary options:
- Check – Some schools will write a check for the amount of the leftover balance and mail it to the student’s preferred mailing address.
- Direct Deposit – Students may be given the option of having their financial aid refund sent to their bank via direct deposit. You will need to provide your school’s financial aid office with your bank account and routing information so they can make the deposit.
- Student Accounts – The last option many schools provide is to have the leftover balance credited towards the student’s school debit account.
How Do I Know If I Am Eligible for a Refund?
Keep up to date with your account balances at school. Most schools have an online portal that allows students to easily monitor what they owe. If your balance indicates that you are owed a refund, contact your school’s financial aid office to coordinate disbursement.