Can You Return Unused Financial Aid Money?

Financial aid consists of loans, scholarships, and grants that help cover the cost of college. Depending how much you need to pay for books, tuition, and housing, you may have some money leftover in your bursar’s account.

What should you do with unused financial aid money? Should you spend it or save it for the future? More importantly, can you return unused financial aid money if you don’t need or want it?

Let’s dive deeper into the pros and cons of unused financial aid money and whether or not returning it is the right move to make.

Why You Might Have Unused Financial Aid Money

When financial aid is disbursed, it’s usually paid to the school directly through your bursar’s account. The school will take out what they need to cover tuition, room and board, and course fees. The rest is yours to spend.

Some students use the leftover money in their bursar’s account to cover books while others use it to join social groups like Greek life. If you don’t want to use your unused financial aid money for college-related expenses you can cash it out to pay off debt, or deposit it into a brokerage account and invest it for future expenses.

Here are some common reasons why you might have extra money in your bursar’s account:

• You overestimated the cost of attendance
• You received scholarships or grants after taking out student loans and no longer need the funding
• You were able to take advantage of cost-saving measures – like living off-campus – reducing your living costs

If the surplus in your account is student loan money, it will have to be repaid eventually. While it could be tempting to take the money and use it to supplement your lifestyle today, keep in mind you’ll wind up paying for it later on – with interest.

How to Return Unused Money From a Federal Student Loan

You may decide you don’t want to take any money out of your bursar’s account, especially money that’s leftover from student loans. You do have the option to return unused financial aid money, but you need to make sure you do so during a specific period of time to avoid interest.

Funds are usually disbursed to your account 10 days before the semester begins. If you’ve overestimated how much you need, you can cancel a portion of your total loan amount. Call your financial aid office to change the amount you need to borrow. This is going to be the easiest option to return unused financial aid money.

If you realize you received too much after your loan has been disbursed, you have up to 30 days to make changes. Reach out to financial aid and let them know you’d like to cancel part of your loan. They will process the request and handle the return on your behalf, without adding interest or fees.

After 31 days your school’s financial aid office might not be required to assist you in returning any unused funds. You can still do so and avoid interest, but you might need to work with your loan servicer instead.

After 120 days after the loan has been disbursed to your account, it can’t be cancelled. You can take the disbursement and pay off a portion of your loan, but if the loan is an unsubsidized student loan it will accrue interest. If you wait until 120 days, make sure that the entire payment goes to the principal balance of your loan to avoid adding on even more interest later on.

How to Return Unused Money From a Private Student Loan

Private student loans are different from federal student loans. The ability to return any unused funds can vary based on your lender and they may charge additional fees.

If your loan hasn’t been disbursed yet, call your lender to cancel whatever portion of the loan you don’t intend to use. Loans that are already disbursed can often be returned within 120 days. Many lenders will waive interest and fees if you complete a return during this time.

After 120 days following disbursement, you can repay any portion of the loan you did not use. Like federal loans, private loans will also accrue interest. The sooner you return any unused money, the lower your interest accrual will be. 

Should You Use the Money or Save It?

While canceling a portion of any unused student loans is an option, you may also have leftover money in your account that you can’t return like a scholarship or grant. Should you use it or save it?

You may need to use the money to cover school-related expenses. This includes:

• Books and school supplies
• Rent for off-campus housing
• Money for groceries

Aside from that, you can also use leftover money to reach your personal financial goals. This could be funding an emergency fund in a high-yield savings account or paying off high interest debt. In 2024, 85% of students had credit cards with an average balance of $2,060.

Once you withdraw, the money from your account it is yours to spend. If you want to go on a shopping spree or use it to cover a spring break trip you can but keep in mind you’ll eventually have to pay this back once your student loans enter repayment.

How Unused Financial Aid Money Can Impact Future Financial Aid Packages

While it’s common to have unused financial aid money, you want to be mindful of how much you receive.

Unused funds are considered an asset according to FAFSA. When you reapply for student loans, unused funds can lower the amount of aid you’re eligible for in the future.

There are also tax implications. Surplus funding from scholarships and grants may qualify as income. If your reported income is too high, it could affect the amount of financial aid you’re eligible to receive.