Where does excess student loan money go after tuition is paid? Refund or credit?

The excess funds get refunded to the borrower! When loan money arrives at the school, they first apply it to outstanding charges on the student account (tuition, fees, on-campus housing, meal plans, etc). Any leftover money gets disbursed as a refund. For Direct Loans taken out by the student, the refund goes to the student. For Parent PLUS loans, the refund goes to the parent unless you specified on the application that refunds should go to the student.

it depends on the school!! my daughter's university automatically puts excess into her student account and she has to specifically request to get it sent to her bank account. took us forever to figure out why we never got the money back lol

Something very important to remember: even if you get that $2K back, it's still part of the loan that needs to be repaid with interest. I've seen too many students treat refunds like "free money" and blow through it, only to regret it when repayment starts. If you don't need the excess funds, you can return it within 120 days of disbursement without any interest or fees being charged on that amount.

WHATEVER YOU DO DON'T let your school keep it as a "credit" for next semester!!! My son's university held $3,200 as a "credit" and then when we tried to get it refunded later they claimed it had been "applied to miscellaneous fees" that were never explained. ALWAYS get your excess money back ASAP!!!

I spent literally 3 hours on hold trying to talk to someone at my daughter's financial aid office about this exact issue. Finally gave up and tried using Claimyr (claimyr.com) to reach them - they got me connected to a real person in about 6 minutes. They have a video showing how it works: https://youtu.be/TbC8dZQWYNQ. Saved my sanity! Turns out in our case the excess was already being processed as a refund, but the school hadn't updated the account to show this yet.

To give you some more details on the refund process for Parent PLUS loans specifically: 1. When you completed the PLUS loan application, you selected who receives any credit balance (you or your student) 2. Refunds are typically processed within 14 days of disbursement 3. Direct deposit is fastest if set up, otherwise a paper check 4. You can contact the school's bursar office to check refund status 5. Keep loan refunds in a separate account so you don't accidentally spend loan money Also worth noting - some schools apply fall/spring loan amounts differently. Some split it 50/50 between semesters, while others might front-load costs in fall and you could see more refunded in spring.

just fyi u should also make sure ur not getting charged any weird "processing fees" for refunds! my friend's school was taking like $35 out for "electronic processing" which is total bs!

Thanks everyone for all the helpful information! I'm going to call the bursar's office tomorrow and specifically ask: 1) when refunds are processed, 2) how to ensure it comes back to me rather than my daughter since it's a Parent PLUS loan, and 3) whether we need to take any specific actions to request the refund. I'll also check if they charge any processing fees. Really appreciate all the advice!

One more thing to keep in mind - the timing of when your loan funds are disbursed versus when tuition is due can affect this whole process. Some schools require tuition payment before loans arrive, so you might pay out of pocket first and then get reimbursed when the loan money comes in. Others hold your registration until all financial aid is processed. It's worth asking about their disbursement timeline when you call tomorrow so you know what to expect and can plan accordingly!

Just wanted to add another important detail - if you do get a refund, make sure to understand how it might affect your taxes. Student loan refunds themselves aren't taxable income, but if you use the money for non-qualified education expenses, you could lose some tax benefits. Also, if you have any other financial aid like grants or scholarships, the refund process might be different since those funds have to be applied first before loan money. The financial aid office should be able to explain how all your different aid sources interact when calculating refunds.

One thing I learned the hard way - if you're expecting a refund, make sure your contact information is updated with both the financial aid office AND the bursar's office. My daughter moved apartments between semesters and we forgot to update her address with the bursar. They mailed a refund check to her old address and it took months to track down and get reissued. Also, some schools have different refund policies for different types of aid, so definitely ask specifically about how they handle Parent PLUS loan refunds versus Direct Loan refunds - the processes might be slightly different even at the same school.

One more tip that saved us a lot of hassle - if you do decide to return part of the loan within that 120-day window to avoid interest charges, make sure you understand your school's return process. Some schools require you to work directly with them to return funds, while others want you to contact the loan servicer directly. We tried to return $1,500 we didn't need and ended up getting bounced between the school and our loan servicer for weeks because neither one wanted to handle it. Finally got it sorted out, but it was way more complicated than it should have been. Also keep in mind that if you return Parent PLUS funds, it reduces the parent's loan balance, not the student's, which seems obvious but can get confusing when you're dealing with multiple loan types.

Just want to add one more consideration that might help - if you're planning ahead for future semesters, you can actually request to reduce your loan amounts before disbursement if you realize you don't need the full amount. This is much easier than dealing with refunds and returns after the fact. You can contact your loan servicer or the school's financial aid office to request a loan reduction, usually up until about 10 days before the scheduled disbursement date. This way you avoid borrowing money you don't need in the first place, which saves you from paying interest on it later. It's especially helpful for Parent PLUS loans since there's no borrowing limit - it's easy to accidentally take out more than you actually need for expenses.

Just to add another perspective - I work as a financial aid counselor and see families deal with this situation all the time. The key things to remember: 1) Schools are legally required to return credit balances to borrowers within 14 days unless you specifically authorize them to hold it, 2) You can set up direct deposit through the bursar's office to get refunds faster, 3) For Parent PLUS loans, the refund goes to whoever was designated as the recipient when you completed the Master Promissory Note. If you're unsure who was designated, you can check this on studentaid.gov under your loan details. Also, keep in mind that even though getting a refund feels good, that money is still accruing interest from the disbursement date, so consider whether you really need those funds or if it makes more sense to return them within the 120-day grace period to cancel that portion of the loan entirely.

This thread has been incredibly helpful! As someone new to navigating student loans, I had no idea there were so many nuances to the refund process. I'm in a similar situation where we might have excess funds, and reading everyone's experiences has really opened my eyes to potential pitfalls. The tip about being able to reduce loan amounts before disbursement for future semesters is gold - I wish more families knew about this option upfront. Also really appreciate the warning about schools trying to push those branded debit cards with hidden fees. It's clear that staying proactive and asking lots of specific questions is key to avoiding getting taken advantage of. Thanks to everyone who shared their experiences, both good and bad!

As someone who just went through this process last month, I can confirm what others have said about the refund timing varying by school. My daughter's university took almost 3 weeks to process the refund even though they claim 14 days. The key thing that sped it up was calling and specifically asking to speak with someone about "credit balance refunds" - using that exact terminology seemed to get me to the right department faster. Also, make sure you understand whether your school processes refunds automatically or if you need to submit a request form. Some schools require you to actively request the refund even though legally they're supposed to return it automatically. It's frustrating but worth knowing upfront so you don't sit around waiting for money that will never come unless you ask for it!

One thing I haven't seen mentioned yet is the importance of keeping detailed records of all your loan disbursements and any refunds you receive. I create a simple spreadsheet tracking the loan amounts, disbursement dates, what gets applied to tuition/fees, and any refunds. This has been invaluable when tax time comes around, especially if you're claiming education credits. It also helps you keep track of exactly how much you've borrowed across different loan types, which is easy to lose sight of when you're dealing with multiple disbursements throughout the year. Plus, if there are ever any discrepancies or issues with your loan servicer down the road, having your own detailed records can save you a lot of headaches. Trust me, the financial aid and bursar offices don't always communicate perfectly, so being your own advocate with good documentation is crucial!

This has been such an eye-opening thread! I'm currently dealing with a similar situation where we're expecting about $1,500 in excess funds from a combination of Direct and Parent PLUS loans. Reading everyone's experiences has made me realize I need to be much more proactive about understanding my school's specific processes. I'm definitely going to call both the financial aid office and bursar tomorrow to get clear answers about their refund timeline, whether it's automatic or requires a request, and any fees they might charge. The tip about being able to return funds within 120 days to essentially cancel that portion of the loan is huge - I had no idea that was an option! I'm also going to set up that spreadsheet tracking system someone mentioned because it's already getting confusing keeping track of all the different disbursements and amounts. Thanks to everyone for sharing your real-world experiences - this is exactly the kind of practical advice you can't find in the official loan materials!