What to do With a Student Loan Refund Check
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!
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.
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!
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 like 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!
Save it for an emergency
College life can be unpredictable. Another way to use a student loan refund check is to save it for an emergency. According to Sallie Mae, only one in two college students have an emergency fund. You can accept your refund, and leave it in your bank account just in case. Or, you can let it stay in your school account in case any other fees arise.
Saving your refund for an emergency is a great way to start building good financial habits.
Return it to pay off student loans
Students don’t have to accept or use their refund check. If you’re not in need of extra money, you can return the refund before it starts to accrue interest. 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
Bottom line for students
There are no rules about what you can and cannot do with a student loan refund check. Be sure to budget wisely, and remember that any amount spent will have to be repaid later. For any other questions about student loan refunds, contact your school’s financial aid office.