Is It OK to Spend Your Financial Aid Refund?

"Just a few weeks into their college education, many students receive funds totaling hundreds or possibly thousands of dollars — the 'extra' money from the student’s financial aid package," Magnify Money reports.
 
"Usually, the money comes with little to no information on how students should spend it, or how to return any funds they may not immediately need.What many students may not realize immediately is, the majority of the time, taking any extra money not truly needed to pay for educational expenses results in them owing even more student loan money and making payments over a longer period of time after graduation.
 
Simply learning about the money and creating a budget could prevent many students from adding to the average $34,144 student loan balance they are already expected to pay back. ...
 
The school legally has to disburse any leftover Federal Student Aid money you are awarded. '[Schools] cannot hold onto that credit balance unless the student gives written consent,' says Karen McCarthy, Director of Policy Analysis at National Association of Student Financial Aid Administrators (NASFAA). In the case of a PLUS loan, the parent must give consent for the school to hold the credit balance. ...
 
Unless you have restrictions on how you can use it, what you decide to do with your refund money as a college student is really up to you.
 
'The assumption is that the student is using that credit balance to pay for those [indirectly billed] expenses,' says McCarthy. ...
 
After you’ve allocated funds to different areas of your budget, you need to figure out what to do with any extra funds. If the money is 'free,' meaning you don’t have to pay it back later, you can keep it, but you may need to look into what you are allowed to spend it on, says McCarthy, as there may be restrictions on how you can use scholarship or grant money.
 
If you think you have enough money for your needs, the experts at ASA and NASFAA agree students should immediately send back any money they don’t think they need, since students can always ask for that disbursement again later on."
 
NASFAA's "Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Inclusion in Today's News does not imply endorsement of the material or guarantee the accuracy of information presented.

 

Publication Date: 9/20/2017

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