What Happens If You Have Leftover Student Loan Money? (2024)

FAQs

What Happens If You Have Leftover Student Loan Money? ›

If there are any funds from the grant or student loan disbursem*nts left over after tuition, fees, and room and board are paid, the remaining balance — often called a “credit balance” — will be paid directly to you in the form of cash or check, or else deposited into your bank account.

Leftover student loan money might feel like a windfall, but it's really not. Remember—you borrowed that money and you'll have to pay it back with interest when your loan is due. Consider sending the leftover funds back to your federal or private student loan servicer as a loan payment.

The school determines the final tuition amount due, taking grants and scholarships into account. If your student loan covers more than that amount, you will receive a refund from your school. Use the excess funds only for education-related expenses. These are expenses that directly or indirectly support your studies.

If there is money left over, the school will pay it to you. In some cases, with your permission, the school may give the leftover money to your child. If you take out a loan as a student or parent, your school (or your child's school) will notify you in writing each time they give you any part of your loan money.

After completion, some borrowers who made excess payments may qualify for forgiveness and receive a refund for their overpayments. You may qualify for a student loan refund if: You had at least one Direct Loan or FFEL Program loan held by the U.S. Department of Education. You were eligible for IDR forgiveness or PSLF.

Another important rule is that any unused student loan money must be returned to the lender within a specific timeframe, typically within 120 days from the loan's disbursem*nt date. Otherwise, interest will begin accruing.

Within 120 days of the date your school disbursed your loan money, you may cancel all or part of your loan by returning all or part of the loan money to us. Contact your servicer for instructions on how and where to return your loan money.

No, student loans aren't a free-for-all spending spree. The U.S. Department of Education and almost all private student lenders list acceptable purchases and expenses, typically tuition, room and board, books and supplies, study abroad expenses, transportation and child care costs.

Returning student loans after 120 days

If you have leftover loan funds several months after first receiving them, and have already covered all of your school-related expenses, you can still return the unused student loan money after 120 days.

If you've reached your limit on federal student loans but still need some assistance paying for your tuition, you might consider taking out a new private student loan. There are options for fixed or variable private student loans, and some lenders like SoFi offer flexible repayment options.

Can you keep unused FAFSA money? ›

You can talk to a counselor in the financial aid office to understand the difference between educational costs and personal costs, so you can manage your taxes. Unused Pell Grant money goes to you – the person who qualified for that amount from the Pell Grant program. You can spend it on whatever you deem necessary.

You can return unused federal student loans within 120 days to avoid paying interest. However, if your unused student loans are private, you will probably have to pay interest.

If you didn't receive enough financial aid to cover your school expenses, you still have options to help you fill in the gap between the aid you've been offered and your school's cost: Apply for scholarships. Request an aid adjustment. Explore additional needs-based programs.

If you've maxed out federal direct loan eligibility, look into the best private student loans to pay for school. Private loans should be considered after federal loans because they typically have fewer repayment options and their terms vary.

A student who has an overpayment of an FSA loan or grant loses eligibility for FSA program aid but may re-establish eligibility by repaying the excess amount or making arrangements satisfactory with the school (optional) or Department to pay the excess amount.

Try to choose an affordable school, apply for scholarships and grants, and consider working part-time while you earn your degree to reduce your overall debt burden. If you have more student loan debt than you feel you can handle, look into income-driven repayment (IDR) plans for federal student loans.

Most lenders, including the federal government and private student loan lenders*, allow you to use your loan funds to pay for other education expenses each school year. That's important to know, as tuition and fees make up only a portion of your actual bill.

While not strictly illegal, investing your student loan proceeds means you must beat the interest rate charged on your loan to reap any meaningful benefits. With current loan rates at 5.50% to 8.05%, the range is incredibly wide, while the historical average return of the S&P 500 dating back to 1928 is 10%.

Federal student aid from the Department of Education covers such expenses as tuition and fees, housing and food, books and supplies, and transportation. Aid can also help pay for other related expenses, such as a computer and dependent care.