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Responsible Spending: Student Loan Refunds

Have you ever received a student loan refund from your college or university and wondered what to do with it? If so, you are not alone! Read on to learn more about what a student loan refund is and how to use your student loan refund responsibly.

What is a student loan refund?

As you begin gathering the amounts needed for your educational expenses, you may notice that most of the numbers you see are estimates. To make sure all your costs will be covered, the student loan amount provided often exceeds the amount owed. The funds left over are paid back to you in a check or as a direct deposit into your credit union or bank account. This is what’s known as your student loan refund, which can be confusing because it is technically loaned funds that need to be repaid, and not free money issued to you.

What now?

Now that you’ve received a student loan refund, what should you do next? Let’s review a few options that might work for you.

• Return it! One of the easiest and most cost-effective choices is to return it. Remember, if you don’t need it, don’t keep it, because whatever you take you will have to pay back later with interest.
• Allow the money to grow. Place the funds into a savings account that earns dividends. Be sure to consider high-yield savings options such as certificates if you don’t plan to use the funds in the near future. The higher the dividend rate, the higher the monthly earnings, and the more you’ll make just for having the money in a high-yield savings account.
• Spend it on essentials. Since there is a list of things that you can expect to purchase as a student, try to designate your refund money for necessities like textbooks, parking passes or rent if you reside off-campus.

Ultimately, it’s good to have a plan when receiving a refund of any kind. If you have no need for cash, return your student loan refund. In the long run, it will be beneficial to give it back versus having to pay it back with interest. But, if you’re in a position where the funds could help you, be sure to make responsible choices about what you use it for.

Sources:

https://scholarships360.org/student-loans/what-to-do-with-a-student-loan-refund-check/