You’ve informed your school of the type of financial aid refund you wish to accept. Discover what is financial aid refund, when, and how you will receive the aid or assistance. Learn what you should do with the aid when you finally grab it, and what you should not do with the aid. Everything you need to know is well explained in this article. So, keep reading, keep exploring, get more knowledge. “Reading is learning, and learning is life, says personal finance expert – “Chiemerie Ozurumba”.
Financial Aid Refund
You may be due a refund once your student loan or other financial aid has been applied to your student account. Expect to have your aid sent to you automatically via direct deposit or check once processed. Except when your account is on hold or partially funded by a Parent PLUS Loan. Meanwhile, you may choose to know more about ACH hold, so you could understand while your account is placed on hold.
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Two important terms you need to know when expecting your financial aid refund.
Parent PLUS Loan Refunds
If a Parent Plus Loan is used to partially finance your account, federal regulations mandate that any excess load funds directly to the borrower. However, by completing the PLUS Refund Authorization Form, the creditor of your Parent Plus Loan will allow passing the funds to you.
What You Should Do
The authorization is valid for one year of assistance. Therefore, if you need to update your Parent PLUS Loan reimbursement address, just request an address change form. Along with a copy of the borrower’s photo identification.
Charges Added To Your Bill
If you have received a financial aid rebate, you will still see some charges on your bill. However, this is because federal laws allow the use of Title IV funds, such as Stafford, PLUS, PELL, and SEOG, to pay for your tuition, registration, services fees, and room and board. Perhaps, since such funds cannot be used to cover finance costs or late payment penalties. However, you can see them on your bill even though you got a financial aid refund.
What You Should Do
To avoid extra penalties, check your bill and pay the outstanding charges or debts by the due date.
What Is a Financial Aid Refund?
A financial aid refund is the amount of money returned to your student account after all financial aid has been disbursed. Meanwhile, if you receive more assistance than is necessary to cover your account balance, your institution will refund the difference in the form of a big, fat check or bookstore vouchers.
However, here is a catch: the money could come from your student loans which means it is not free money. That money carries a hefty interest charge that you will eventually have to pay someday.
When Should You Expect Your Financial Aid Refund?
The form of aid you consider has an impact on when you can receive it. Let’s take a look at some types of financial aid refunds and when you are likely to get them.
Grants and Student Loans
In most cases, the school will disburse your grant or loan funds in at least two installments known as disbursements. In the majority of situations, the school is required to distribute your grant or loan funds at least once a term (semester, trimester, or quarter). However, schools that do not use conventional semesters or quarters are typically required to disburse your grant or loan funds twice. For example, at the start and midpoint of the academic year or program.
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What you should take note of
If you are a parent applying for a Direct PLUS Loan to assist with your child’s educational expenses, your loan funds will be disbursed on the same timeline. In some case you have never taken out a federal student loan before, the following can apply:
- If you are a first-year undergraduate student and a first-time borrower, your school may require you to wait 30 days after the start of your enrollment period (semester, trimester, etc.) before issuing your loan. Consult your school to determine whether this law applies.
- You must complete entrance therapy before your school can disburse your loan funds, borrowing for the first time.
- If you are a college or professional student who is applying for the first time for a Direct PLUS Loan, you must complete entrance therapy prior to receiving your first loan disbursement. Anyways, to a parent applying for a Direct PLUS Loan to assist with the cost of your child’s education, counseling is not needed.
You are expected to be paid at least once a month if you accept a work-study position.
Bonus Tip: Contact your school if you do not receive the form or amount of financial assistance you expected. The financial aid office will clarify the process by which your aid was calculated.Neptunmag Advice
How you will receive your financial aid refund?
How you will receive aid is determined by the type of aid you accepted.
Student Loans and Grants
Typically, the school can apply for the grant or loan funds toward tuition, fees, and room and board (if you live on campus). Any money remaining is billed directly to you for other educational expenses. Therefore, if you receive your loan funds but later determine that you do not need them, you will cancel all or part of your loan within 120 days of receipt without incurring any interest or fees.
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Unless you suggest otherwise, the school must pay you directly into your bank account. Or, perhaps, using the funds to pay for education-related costs on your account (e.g, tuition, taxes, room and board)
Direct PLUS Loans for Parents
In most cases, your child’s school will credit your loan money to your child’s school account. Which will be used to pay tuition, taxes, room and board, and other approved charges. However, the school will pay you any money that is left over if there is any. Meanwhile, with your permission, the school can give your child any money that is left over.
Take Away Tip: If you take out a loan as a student or parent, your school (or your child’s school) will notify you in writing whenever they disburse any portion of your loan funds. Simultaneously, they’ll provide information on how to cancel the entire loan or a portion of it if you discover you no longer require the full amount. Additionally, you will receive confirmation from your loan servicer that the funds have been received.Neptunmag Discovery
How Do You Pay for Textbooks and Other Course Materials If Your Financial Aid Has Not Been Received?
Schools that participate in federal student aid programs are required to provide a method for you. Perhaps, to help you obtain your books and supplies by the seventh day of the term if you are receiving financial aid. You are eligible for disbursement (the payment of your financial aid) ten days prior to the start of the term. However, after financial aid is applied to your tuition, fees, and other school charges, as applicable, you will have a credit balance (i.e., money remaining).
Note: Your school can inform you whether the aforementioned criteria apply to you.
How Your School Gets Your Financial Aid Funds for Your Course Materials
You can inquire with your financial aid office about this as it differs by school. For instance, if the school provides a bookstore voucher or another method for students to purchase books and supplies through the school or its bookstore, you could obtain your materials through that method.
Secondly, if the school provides financial assistance, there could be funds (as your credit balance) remaining after the aid is applied to tuition, fees, and other school costs. Therefore, if you have a credit balance, the school must transfer it directly to you within 14 days, unless you allow the school to retain the funds to cover future institutional costs.
However, it is the duty of your school to provide the lesser of your credit balance. As well as the amount required for books and supplies (as calculated by your school). Your school will be able to inform you if this applies to you.
In general, the school must provide you with the option to opt-out, accept a check from the school, and purchase the books and supplies on your own, unless one of the following exceptions applies:
- The school should provide a valid health and safety justification for purchasing the materials through the institution or its supplier.
- The school should show that the materials are not currently available elsewhere or are not otherwise open to students.
Things You Should Not do With Your Financial aid refund
#1. Don’t buy things you don’t need
Having much cash in your checking account can make it easy for you to fall into the temptation of shopping online. Perhaps, you might have bought a new collection of clothes, designer handbags, shoes, with many more. It’s quite sure you don’t wear those collections any longer. Meanwhile, they will remain your series of spending you probably regret most.
#2. Don’t lend to someone who won’t pay back
This is a bit of a catch-22 situation. I’ve lent money to my friends many times when they were in need. However, what is the end result? I’m no longer acquainted with those individuals, and I’ve lost more than $700 as a result of my generosity. Anyways, I learned my lesson.
#3. Avoid spending much on things not related to school
Attending every single happy hour during your freshman year of college would cost you a lot of money, even if you don’t care. The reality is that you are spending money on things unrelated to your studies.
Nevertheless, the truth remains that you used your financial aid refund to go out. Frequently, you don’t even have a part-time job to cover your recreational expenses.
In general, receiving a financial aid return check meant that you didn’t have to think about self-sufficiency. Although you might not throw wild bangers in your dorm room, you have actually spent your fund on non-school-related items.
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#4. Don’t spend extravagantly on a trip
travel is a luxury but you could definitely have to be patient and wait until after your graduation. Then, your finance might be in order. Right now as a college kid you need good money management and good budgeting skills.
Recent Discovery On Where Most Students Spend Their Financial Aid Refund
Although the 2016 Student Loan Hero report does not directly address financial aid refunds, it highlights how certain students use their student loans for non-educational expenses.
According to the study, 41% of students surveyed used their loan funds to pay monthly bills, 15% to purchase new clothing, 13% to eat at restaurants, 19% to pay for cars and insurance, 3% to travel, and 2.5 percent to purchase drugs or alcohol.
What You Should Do With Your Financial Aid Refund
#1. Help your finance first before helping others finance
Sure, it sounds like a good deed, and it most likely is, assisting others with their financial situations. However, assisting others with their finances should come after assisting your own. Occasionally, you may find yourself with more than $2,000 in credit card debt exactly where you should have put your return. However, you decided not to and are probably now paying the price.
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Basic Advice On What You Should Do With Your Financial Aid Refund
Katharine Perry is a Fort Pitt Capital Group financial advisor who specializes in working with millennials. According to her, students should not see their financial aid refunds as free money. However, with student loans, nothing is ever free, she said. “As a result, students must be prudent with their money.”
So, what are your options? Perry suggests that students apply it to their indirect school expenses, which include books, materials, off-campus lodging, and transportation.
And what if you already have those costs covered, maybe by a part-time job or any additional assistance from your parents?. “Save it,” she advised. “You never know when you’re going to be in need of money.”
After that, leave it alone. “Ensure that you are acting responsibly,” she added. “Definitely use it as a cushion in case you do find yourself in a pickle, but use it prudently.”
How about student loans, can the money be used to repay them? Perry believes that is not always the case. She encourages students to apply the additional funds to their highest-interest debt first. “Student loans are going to hit you hard when you graduate. Therefore, make sure you graduate with no other debt,” she advised.
The choice to keep your financial aid return may be a small step in the right direction, but it’s a step nonetheless. Be wise in your spending, focus your spending however on school-related things the most. Learn how to budget as well as how to save, these are both important to you as a college student. Are you a medical student? Find available medical student loans.
Over to you: At the comment section below, let us know how you have spent your financial aid refund so far.