Understanding Student Loan Refunds
As we know, financial aid sometimes raises question. This can be especially true with the concept of a student loan refund. Why? Because for some students, the refund itself comes with a cost: having to pay back those funds (in the form of a loan with interest) after graduation. We spoke with Michelle LaBonte, Assistant Director of Student Financial Services at Suffolk University, to learn a little more about student loan refunds.
Jonathan: So Michelle, what is a student loan refund anyway?
Michelle: A student loan refund is exactly NOT what it sounds like. A student loan refund is the result of a student borrowing a loan in order to cover some of the college costs that are not billed directly to a student's account (such as books and supplies or an off-campus apartment). Students are permitted to borrow loans to cover these expenses, but when they do, they initially end up with an outstanding credit on their account. Students can take this credit and use it to pay for those non-billed college costs, but they must keep in mind that they will have to repay those funds… with interest!
Jonathan: Okay, that makes sense. If I end up with a credit on my student account and plan to use it to pay for some of the expenses mentioned earlier (books, off-campus housing, etc.), what is the process like for requesting a refund?
Michelle: The process will vary from school to school, however for most schools the refund process happens automatically. At Suffolk, any student that overpays will automatically have a refund processed (unless the student asks otherwise). No action is required on behalf of the students. This is typical for most schools, however, not the process for all! So make sure to check with your college or university.
Jonathan: Is the refund directly credited to a student's bank account or is it a live check?
Michelle: That will depend on the school. At Suffolk, if the student has a direct deposit on file (the preferred method) it will automatically be deposited into a student's bank account via direct deposit. However, for any student that does not have direct deposit on file, Suffolk (like many schools) will generate a live check that students will need to pick up (or, if requested, it will be mailed).
Jonathan: How long does this process (typically) take?
Michelle: At Suffolk, refunds are typically processed within 5 business days. In general, schools will process refunds between 7 and 14 business days from the time the account has been credited. Of course the time of year and volume might dictate or push that process out a bit. Some schools will allow an advance on the student loan refund (meaning the student can get the refund amount before it actually shows on the account), which can be particularly helpful in the beginning of the school year for students that need to cover expenses (e.g. off-campus housing).
Jonathan: Any other advice for students requesting a refund?
Michelle: Know the source! If you are being handed money from your school, you need to know where it is coming from, because in almost all cases, a refund on a student account is because of an over payment on a loan.
If you have questions about how student refunds work at your college or university, check in with your financial aid or bursar's office.