How to Decline a Loan

Don't accept more in student loans than you need.

The rising cost of college tuition has resulted in a subsequent rise in the amount of student loans applied for to pay for those tuition costs. Most students seeking financial aid must complete a Free Application for Federal Student Aid provided by their college or university. Upon completion of the application process, the student is notified about the types and amount of aid that will be offered by each school designated on the FAFSA application. Depending on the overall cost of tuition, fees and expenses at the student's college of choice, it may be necessary to decline some of the student loans offered as part of the financial aid award package.

Instructions

1. Determine the overall cost of tuition, fees and all expenses for the given term. Include items such as room and board, books, food and transportation. Exclude items that can be funded by external scholarships or grants, such as a $1,500 scholarship from your church intended to be used for books. This is your total cost for the term.

2. Determine the total amount of aid offered as grants and scholarships. Most schools will offer a mixed financial aid award package that may consist of loans, grants and scholarships. Separate and calculate the total of the awards labeled as grants and scholarships first, as these items typically do not require repayment.

3. Determine the total amount of aid offered as student loans. Subtract the total amount of aid awarded as grants and scholarships from the total amount of your award package to reveal the total amount of loans you have been awarded.

4. Determine the surplus loan amount from your award package. Subtract the total amount of grant and scholarship funds offered from the total cost of the term. For example, if the total cost of the term is $6,375 and the total grant and scholarship funds are $2,350, subtract $2,350 from $6,375 to get $4,025. Subtract this amount from the total amount of student loans awarded to reveal the amount of excess student loan funds you have been awarded. To illustrate, If you have been awarded $5,100 in student loan funds, subtract $4,025 to reveal a surplus of $1,075 offered in student loans. You have been offered $1,075 more in student loans than it will cost to fund your education for the given term.

5. Visit your school's financial aid office to decline the excess student loans. Most schools will have a specific process required to decline loan funds. Ask to speak with your financial aid counselor to complete this process. Explain that you have determined you were awarded too much in the way of student loans and would like to decline the loans that are not needed.

Tips & Warnings

• You have the right to both decline your student loans or reduce the loan amount. In the event that you do need the student loans offered but do not need the entire amount, ask for the loan to be reduced instead of declined.

References

• Department of Education: Applying for Direct Loans