Student loans can provide much-needed help in paying for college. But tuition and fees aren’t your only expenses as a student. While student loan funds are typically paid directly to your school, if there’s money left over, you may be able to get a student loan refund check and use that money for other eligible expenses. Here’s what you need to know about how student loan refunds work, how to get one and what to do with student loan refund money when you receive it.
What Is a Student Loan Refund?
When you borrow student loans to pay for school, whether you take out federal or private loans, the lender usually disburses the money directly to the school. If you still have loan funds left over after tuition and fees are paid, you can often get the remainder in the form of a student loan refund. This student loan money may come as a student loan refund check or be deposited directly into your bank account. But how do you know if you’re getting a refund check from your school? You can typically take a look at your online account with the school to see how much you’ve borrowed for the academic term and whether there are funds left over after paying what you owe for your classes. Not all schools will send you a refund check, though. In some cases, the university may choose to apply the funds to your tuition and fees for the next term.
How to Get a Student Loan Refund
If your school offers student loan refund checks, you should receive one after your school has certified that it has received student loan money from your lender and there is extra money. So how long does it take to get a student loan refund? The school will typically disburse the refund within 14 days of applying your student loan funds to tuition, fees and other eligible expenses paid directly to your school. You should receive communication from your school that you’re owed a refund and will receive the money. Note that you may be owed a refund in other cases not involving financial aid. In this case, you may need to request a refund in order to receive it. You may also receive a disclosure explaining that you can cancel a portion of your student loan debt and return it to the lender instead of taking the refund check. You don’t have to make up your mind immediately, though. You can cancel a federal student loan within 120 days of receiving the funds. With private student loans, this process may vary.
What to Do With a Student Loan Refund
If you decide not to cancel student loans and instead receive a student loan refund check, it’s important to understand that student loans are designed to cover only certain eligible expenses. According to the Office of Federal Student Aid, the list includes:
- Tuition and fees
- Room and board
- Textbooks
- Supplies and equipment necessary for study, such as a computer
- Transportation to and from school
- Child care expenses
In other words, if you’re thinking of using student loan money to invest, take a vacation or improve your lifestyle, you may be in violation of your loan agreement. Remember, though, that any money you receive in a student loan refund check must be repaid with interest. That can become expensive, especially if you have unsubsidized loans and the government isn’t paying your interest while you’re in school. So if you have enough cash for other expenses from another source, it may be better to just cancel the remaining amount.
How to Make the Most of Your Student Loan Refund Check
If you decide to receive student loan refund money rather than canceling student loans, here are a few student finance tips for making the most of your student loan money:
- Cover eligible expenses: By knowing what student loans can be used for, you’ll have the information you need to make smart financial decisions about your college expenses.
- Use it as an emergency fund: If you don’t have a small buffer of cash in your savings account, consider using some of your student loan money to create one. Of course, you’ll still be limited in how you can use the money, but it may help you avoid financial difficulties while you’re focusing on school.
- Don’t take what you don’t need: If you have a credit on your account with your university, you don’t need to decide whether to accept or reject all of it. Instead, you may be able to cancel a portion and receive the rest as a refund. Take a look at your upcoming expenses for the term and determine whether or not you need the full amount that’s left over.
And if you’re wondering at any point where your student loan refund is, contact your school’s financial aid office directly for an update on the process.
The Bottom Line
Understanding how student loan refunds work can help you make the most of your student loan money. If you’re due some money, consider how much you need to get by for the next term, knowing that you can receive aid again in the future. If you’re not sure about what to do, don’t hesitate to speak with your parents or contact your school’s financial aid office for help in your decision.
