Student Loan Refund

That’s no refund! The reality of the student loan refund check

If you’ve got student loans, then you already know about the seemingly lovely thing that is the refund check.

At the beginning of each semester, you’re given the option to get a “refund check” for any leftover student loan funds available to you after your tuition is paid.

We understand that it’s tempting to take it—especially when money’s tight. Now sometimes, you really do need that refund money. No argument there. But you shouldn’t accept the check if you can avoid it.

The refund that isn’t a refund

Why? Well, that refund isn’t a refund at all. It’s a loan—and you’ll have to pay it back along with all the funds you used to pay for school. And you start paying interest on it as soon as you get it.

Confused? We don’t blame you. Maybe looking at the difference between the definition of a real refund and what you’re looking at with the financial aid refund check will help.

A refund defined

Money you receive back due to having made an excess payment; a reimbursement.

The financial aid refund check defined

The typical definition of the word “refund” implies that you are getting something back because you spent too much somewhere.

But the financial aid refund isn’t actually money you’ve spent. It’s money you’ve borrowed from the government that more than covers what financial aid is needed to cover things like tuition and fees and room and board.

Your total cost of attendance also includes books and supplies, travel, and miscellaneous expenses, all of which are eligible educational expenses where you can use your financial aid loan money.

That’s why you’re offered that check.

It’s not money you have spent or repaid. It’s money you’ve borrowed that you’ll have to pay back later—with interest.

There’s no such thing as free money

So while it may just look like magical money with your name and instant gratification spending written all over it, available for you to cash in on at your every whim until it’s gone, you will have to pay it back.

That $500 you got last month? If you’re a senior, before the end of the year, you’re looking to pay back about $530 just for that one check—and at least that much for every additional $500 you take out.

Keep a lid on your borrowing

Don’t go on financial aid autopilot. Your finances can and will likely change a bit each semester.

It’s a bad idea to allow a lender or the financial aid office to decide how much money you need without personally monitoring how much you’re taking out.

If you do, you’re likely to get more than necessary back in a check each semester—which turn into bigger payments after you graduate.

Last word on financial aid refunds

Only borrow what you need for your educational expenses—things like books and school supplies.

And if you do over borrow, don’t be afraid to return the money to your lender—even if you use direct deposit. Your bursar’s office can help you make it happen.

For a list of qualified expenses that are considered educational costs, talk to Financial Aid.