Should You Return Unneeded College Aid?
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Here's your Money Briefing for Thursday, April 8th. I'm J.R. Wayland for The Wall Street Journal. College can be one of the biggest expenses in a person's life, and many people rely on federal loans to pay the bill. But what if you get more money than you actually need?
Some families just check off the boxes on their financial aid officers, not realizing they can accept some part or even none of the loan money that's been offered. Other times, a student might find a summer job and not need to borrow as much as expected.
So should you keep the extra money or pay it back? Our contributor Cheryl Winokur-Munk will be here with answers after the break.
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Americans are currently holding more than $1.5 trillion in student debt, but many of them applied for more money than they actually wound up needing.
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So what do they do with that extra cash? Contributor Cheryl Winokur-Munk is here to talk about the options. Cheryl, thanks for being here.
Thanks for having me.
So, you know, Cheryl, for a lot of college students and families, every dollar of financial aid counts. But what kind of scenarios would create unneeded money that they could potentially send back?
It's actually interesting. Some families just check off the boxes on their financial aid officers, not realizing they can accept some part or even none of the loan money that's been offered. Other times, a student might find a summer job and not need to borrow as much as expected, or the person might even receive a scholarship after having checked off the box for a loan. And if you receive a scholarship, let's say you were borrowing $1,000 and you got a $1,500 or even $1,000 scholarship, you might not need that full amount of the loan or you may not need the loan at all.
Okay, so if somebody does have financial aid money left over, do they have to give it back?
So you don't have to give it back, but you want to be careful how you use it. So you don't want to violate the terms of the master promissory note you signed with the federal government for taking out loans in the first place. It really should be used for school-related purchases. It doesn't have to be tuition, though. So, for example, it can be a computer or living expenses or even food, something like that, things related to school.
Ah, okay. But do you have to show receipts? And is there somebody overseeing what somebody does with that money?
Not really. It's kind of like an honor system. And certainly people have been known to use funds for things like vacations or something not school-related, but they're not supposed to be used that way, and it's really not in the student's best interest to do so.
But there are different kinds of loans out there, subsidized and unsubsidized. What's the difference, and how could that influence a student's decision to return money?
So with a subsidized loan, while you're in school at least half time and for the first six months after you leave school, the Department of Education will pay the interest.
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