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What to Do With a Student Loan Refund Check
By
Kayla Korzekwinski
Kayla Korzekwinski is a Scholarships360 content writer. She earned her BA from the University of North Carolina at Chapel Hill, where she studied Advertising/PR, Rhetorical Communication, and Anthropology. Kayla has worked on communications for non-profits and student organizations. She loves to write and come up with new ways to express ideas.
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Maria Geiger is Director of Scholarship Services at Scholarships360. She is a former online educational technology instructor and adjunct writing instructor. In addition to education reform, Maria’s interests include viewpoint diversity, blended/flipped learning, digital communication, and integrating media/web tools into the curriculum to better facilitate student engagement. Maria earned both a B.A. and an M.A. in English Literature from Monmouth University, an M. Ed. in Education from Monmouth University, and a Virtual Online Teaching Certificate (VOLT) from the University of Pennsylvania.
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Are you a student who received a student loan refund check? Lucky you! Refund checks can be thousands of dollars — that’s a lot of money! It’s easy to want to spend it, but there are important things to consider when you receive a refund check. Continue reading to learn about students’ options when they receive their refund!
Related: How to create a budget in college
What is a refund check?
When students borrow loans or receive financial aid, the amount borrowed is based on their school’s cost of attendance. The cost of attendance is an estimated amount that includes tuition, fees, room and board, textbooks, supplies, and other expenses related to education.
It is just an estimate, so oftentimes the borrowed amount exceeds the actual amount paid for the semester. When this happens, your school will give you a refund to pay the difference. The refund can come in the form of a check, direct deposit, or credit to your school account. Refunds are disbursed every semester, usually after your school’s add/drop period.
Typically, these refunds are intended to cover school-related expenses such as off-campus housing, supplies or transportation. However, there are also cases in which students have borrowed more than they actually needed, resulting in a refund check.
It’s important to know that refund checks are not “free” money. Any amount that students choose to spend will have to be repaid with interest. Below are some tips to be sure you use your refund in the best way!
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More scholarships for college studentsReasons for receiving a student loan refund
There are a few different reasons a student may receive a student loan refund. Here are the most common reasons:
- The amount of federal student loans applied to an account exceeds the account’s outstanding balance
- More was paid than actually due
- There was an account balance adjustment that resulted in a lower balance owed
- Student loan forgiveness refund
Also see: Navigating different types of student loans
What is a student loan forgiveness refund?
The Department of Education grants student loan forgiveness to certain students, so it is possible to receive a student loan forgiveness refund.
Students who may qualify for student loan forgiveness refunds includes:
- If you are on an income-driven repayment plan or were on one previously
- Participating in the Public Service Loan Forgiveness program
- Have Direct Loans or Federal Family Education Loans and are interested in an income-driven repayment plan
If you are eligible for a student loan forgiveness refund, you will receive a notice. Then, you will receive your refund through the same method you originally used to make your payment such as check or electronically.
Don’t miss: Scholarships & grants to pay off student loans
What should I do if I receive a student loan refund?
Return it!
The best option when you receive a student loan refund is to return it. At first, it can be extremely exciting to receive hundreds or thousands of dollars back. However, this refund is simply loan money. Meaning, it will need to be paid back with interest. So, if you have the financial flexibility to be able to return it right away you can end up saving a lot of money in the long run.
Returning a refund check is essentially paying off a chunk of your loan balance early. You can also choose to accept some and return the rest.
See also: Paying off student loans early
Spend it on essentials
Receiving thousands of dollars can be exciting. Students may want to spend their refund on things like clothes, technology, or a vacation. This is not the wisest thing to do, and it can form poor financial habits. Students should spend their refund on things related to the cost of attending college, or something that will advance their future. Some of these costs include:
- Textbooks, notebooks, and other supplies
- Transportation or a parking pass
- Living expenses such as rent or groceries
- A new laptop
Other essentials that a refund check can be used for are investing in a college fund for graduate school or using it to pay off other debts, such as credit card debt.
Remember, your school gave you financial aid because they thought you’d need it. Don’t feel bad about spending your refund check if you have to. Just be sure that you’re smart about it because it will have to be paid back.
Also see: How to save money in college
Save your refund for an emergency
College life can be unpredictable. Another way to use a student loan refund check is to save it for an emergency. You can accept your refund and leave it in your bank account just in case any unforeseen expenses arise.
Saving your refund for an emergency is a great way to start building good financial habits. However, it may be in your best interest to return the refund if you do not have an immediate use for the money to avoid accumulating interest.
Check out: How does interest work on a student loan?
How can I return my refund?
In order to return your refund, you will need to contact your student loan servicer. From there, they will provide you with instructions on how to return your student loan refund and as well as how much you are willing to return. If you have any questions about this process, you should contact your student loan servicer!
Watch out for student loan refund scams!
When it comes to student loan refunds, sometimes it is too good to be true! If you receive any unsolicited phone calls or emails from companies that are not your student loan service provider or the Department of Education – do not trust it!! Many scammers are taking advantage of vulnerable students who are trying to pay off their student loans. So, be wary of anything that seems off and you can always call your loan provider or the Department of Education to ensure any information you’ve received is legitimate.
Keep reading: How to spot student loan forgiveness scams
Key Takeaways
Keep reading:
For students, college can be a financially challenging time. Learning how to fill out the FAFSA is an important first step in the financial aid process. Learn how to write a winning scholarship essay and become more confident when you apply. of luck in your future endeavors and remember, Scholarships360 that is here to help! Make sure that you apply to all the scholarships you qualify for while you are eligible!