What Is a FAFSA Refund?

Your FAFSA refund check can help cover the cost of housing or living expenses.
Your FAFSA refund check can help cover the cost of housing or living expenses. (Image: Jupiterimages/Comstock/Getty Images)

Everybody knows college tuition can be expensive, but so can living expenses while you work for your degree. Although many students and their families concentrate on financial aid that can help defray tuition costs, some federal award money may also be spent on items such as books and supplies or housing costs. If you receive more financial aid than your tuition for the billing cycle, you may be eligible to receive a portion of that aid returned from your school’s financial services department.

FAFSA Refunds

When you receive a financial aid award after submitting a Free Application for Federal Student Aid, or FAFSA, from the U.S. Department of Education, the award isn’t sent directly to you, but rather routes directly to your college. These payments, known as disbursements, are made twice a year and usually coincide roughly with the start of fall and spring semesters. If your award exceeds your tuition amount for the semester, rather than return the money -- which may contain loans or scholarships as well as grants -- your college returns the unused money to you in the form of a refund check or electronic transfer.

Qualifying Funds

Not all awards made by the Education Department are refundable. Certain grants, such as the Federal Pell Grant and the Federal Supplemental Education Opportunity Grant, may only be applied toward tuition, and are applied to your bill first. Your college’s bursar or financial aid services will return the excess to the Education Department. Other aid, such as private scholarships and federally subsidized loans such as the Stafford Loan, may be returned to you to help focus on other costs.

Uses for the Money

Federal student loan awards -- and most other private scholarships and loans -- may only be used toward educational expenses. Although this is broad enough to cover items as broad as a new computer and textbooks to housing costs and child-care bills you amass while in class, you’ll have to get a job and earn the cash to buy that gorgeous handbag or that new guitar.

Promissory Notes

Before you accepted any financial aid offers from the Department of Education, you likely signed a promissory note that declared your intention to attend college for the period in which the award was given. This note legally binds you to attend college, and if you drop out during the course of a semester, you may be forced to return any funds that were provided in your FAFSA refund check.

Returning Excess Money

In many cases, your FAFSA refund check isn’t free money, but a loan that must be repaid after you graduate. Because of this, you may consider returning a portion of your refund to your school, which will, in turn, return it to the Education Department, so that you aren’t saddled with student loan bills after graduation for funds you didn’t need.

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