Can You Return Your Unused Student Loans?

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Ben Luthi

By Ben Luthi

March 3, 2021

As a college student, you know what your tuition costs are going to be, but when it comes to books and living expenses, it’s not always easy. That’s why I ended up borrowing more than I needed a few times while I was a student, and ended up with unused student loans. 

At the time, I didn’t know what to do with the extra cash, and I ended up making the poor choice of using the student loan money for vacation — and I paid for that mistake for several years. 

Can You Return Your Unused Student Loans?

It is possible to cancel a portion of your federal student loans, which effectively allows you to return the money you don’t need. To do so, though, you’ll need to contact your school’s financial aid office within 14 days of receiving the notice that your loans are being disbursed. Private student loans don’t offer this option.

Returning your unused student loans this way can save you a lot of money in the long run. Sure, you won’t actually have to start making payments on the debt until six months after you leave school or fall below half-time enrollment. 

But unless you have Direct Subsidized Loans, interest will accrue on that debt while you’re still in school. Even with subsidized loans, you’ll be on the hook for interest charges on that portion of your loan balance after your payment grace period ends.

Also, having a portion of your student loans canceled also means that you don’t have to pay the cost of the loan fees.

What Else You Can Do With Unused Student Loan Money

If you’ve missed the deadlines to cancel the portion of your student loans that you don’t need, there are other ways you can make the most of your situation. 

The most effective way is to use the money you don’t need to make a payment on your student loan balance. Again, you typically don’t need to make payments while you’re still in school, but reducing your debt can save you money in the future.

Alternatively, you can hold onto the money and just borrow less for the next term. In the meantime, create a budget so you have a good idea of how much money you typically spend each month on living expenses and what you can expect to pay for books and other supplies. 

Doing this will make it easier to determine how much you need to borrow, so you don’t end up with a surplus again. 

The Bottom Line

If you received more student loan money than you need, avoid treating it like a bonus you can use however you want.

If you just received your student loans, contact your financial aid office to return the portion you don’t need. If you’ve missed that deadline, you can still try. But if your request is rejected, consider using the money to make a payment on your debt or keep it for the next semester.

Above all things, take some time to understand your monthly expenses, so you can plan your student loan needs better in the future.

Struggling with student loan debt?

There are ways you can lower your student loan payments, including enrolling in an income-driven repayment plan, temporarily going on a deferment or refinancing student loans to lower your interest rate. Keep in mind that refinancing federal student loans means a loss in many benefits – income-driven repayment plans, any federal forgiveness programs, generous deferment options, and more.

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