When you’re paying for college, it feels like you can use all the help you can get.
That’s certainly the case when it comes to scholarships and grants you don’t have to pay back. But you don’t want a penny more than necessary when it comes to expensive student loans. Fortunately, if you borrow federal direct student loans you can give them back without paying interest.
How to return federal student loan money
Contact your school’s financial aid office
As soon as you know you would like to return all or part of your federal student loan, call your school’s financial aid office. They can instruct you on the specifics of how to proceed, but you can generally expect the following:
If you provide a written request for cancellation up to 14 or 30 days from either the date that the school notified you of your right to cancel or the date the loan money was disbursed (the deadline depends on the specifics of your situation), your school should be able to return the money to the loan servicer for you.
Just be sure to keep a copy of the letter and send it via certified mail with return receipt. This way you have proof of the content of your request, as well as the date it was received by the financial aid office.
If you provide a written request for cancellation between 30 and 120 days from the date your loan money was disbursed, it is at the school’s discretion whether they process the cancellation request.
If they will not do so, then you are responsible for returning the money directly to the loan servicer. In that case, contact the Direct Loan Servicing Center, the phone number and address for which you will find on your loan correspondence.
Regardless of your situation, give your financial aid office a call first to be sure you are clear on what needs to be done and by what deadline date.
After providing your written request for cancellation, look for the return receipt in the mail. Once you receive that back, follow up with the financial aid office to see where things stand.
What you’ll actually give back
If you are able to return your loan through one of the two methods outlined above, then you will only be responsible for giving back the loan amount you wish to return. You are not responsible for any associated fees or student loan interest that has accumulated since the loan was disbursed.
After 120 days
All is not lost if you miss the 120-day deadline. While you won’t be able to return your student loan, you can absolutely pay it back. Simply send it into your student loan servicer the same way you would any other student loan payment.
Yes, you will still have to pay fees and whatever interest has accumulated up to that point. But returning money you really don’t need could save you hundreds of dollars in interest over the life of the loan.
How to avoid borrowing too much in the first place
Though this process is in place for returning federal student loan money you do not need, you’ll be much better served by avoiding such a situation in the first place. Here’s how to borrow the correct amount the first time.
Do the math
- How much money are you receiving from other sources?
Include scholarships, grants, work-study programs, your parents, your own savings, and part-time or summer jobs.
- How much is your cost of living?
Include tuition, room and board, transportation, and books and supplies. If you’re living off-campus, room and board refers to rent and a minimal food allowance.
Any additional expenses are not the kind of things you should be spending student loan money on anyway. The only exceptions may be money needed for tutoring, a software program needed for school, or disability-related expenses.
- How much do you need to borrow?
Subtract your estimated cost of living from the amount you are receiving from other sources. You don’t need to borrow any more than that.
Choose an affordable school
If you have yet to enroll, look closely at the cost of attendance for the schools you are considering. If your top choice is going to cost you tens of thousands of dollars more than your second or third preference, consider going with one of the cheaper options.
The Financial Aid Shopping Sheet makes this process much easier. Participating schools use this sheet to notify students of financial aid offers made after the submission of FAFSA. The universal format makes it easy to compare schools by:
- Cost of attendance
- Grants and scholarships
- Net costs
- Work-study options
- Student loan options
- Suggested family contribution
- Graduation rate
- Loan default rate
- Median borrowing amount
If you do not receive the Financial Aid Shopping Sheet from a school you are considering, ask for it.
If you have more student loan money than you need, you’ll have no trouble finding a place to spend it. What’s tougher is returning that money and challenging yourself to live like a student. The “frugal you” with money in the bank 10 years from now will thank you for the lesson.
Need a student loan?Here are our top student loan lenders of 2019!
|1 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB). Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (TCM) and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicants ability to supply the necessary information for submission.
2 Important Disclosures for CollegeAve.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Information advertised valid as of 2/1/2019. Variable interest rates may increase after consummation.
3 Important Disclosures for Discover.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
4 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
SunTrust Bank, Member FDIC. ©2019 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
6 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
7 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
8 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|4.23% – 13.23%1||Undergraduate and Graduate|
|4.20% – 11.44%2||Undergraduate, Graduate, and Parents|
|4.84% – 13.49%3||Undergraduate and Graduate|
|4.50% – 10.11%*,4||Undergraduate and Graduate|
|4.25% – 13.25%5||Undergraduate and Graduate|
|5.85% – 6.99%6||Undergraduate and Graduate|
|3.95% – 9.81%7||Undergraduate, Graduate, and Parents|
|4.45% – 12.42%8||Undergraduate, Graduate, and Parents|