Let’s say you only needed a small loan for your first year of college (around $3,000) because your school gave you a large scholarship and good financial aid package. You get one hooked up to your student account. Then, between May-August, you receive outside scholarships surpassing the amount of the loan you took out. Can you reduce or eliminate this loan somehow? are there financial consequences to this?
Thanks~
The loan won’t be disbursed until your term starts. If you don’t want/need it, just tell your FA office and they will cancel it. No big deal.
Did you report the outside scholarships to the school? The school may reduce the amount of the loan per its policy on outside scholarships.
I took it as they haven’t hear back about these scholarships and if they were actually awarded one and how much.
You get loans disbursed by term. So if you get a disbursement and you don’t use it you can repay your loan without penalty. Not through the school, but by going to your loan portal and figure out who holds the loan and making a payment. You still have to pay the loan fee that comes with taking a loan. And if any are unsubsidized they may accrue a little interest meanwhile but no big deal.
Actually it would be more beneficial to ask for the school to facilitate a return, especially when returning a full amount offered for the semester - as the school can essentially cancel the loan, thus saving the student the origination fee or accrued interest.
@kgos16
Can you elaborate?
If a student starts the semester and a month passes, wouldn’t there be a little interest accrued at least?
So, if I pay off the amount of loan money i took out for that month and that interest i could call my college and ask to cancel the rest of my loan for that semester with no penalty?
Of course. The student has 120 days from the point of disbursement to make updates to the amount through the school. If the loan has accrued interest and you contact the school soon after, the loan can be completely cancelled and the interest accrued backed out. You would need to work with the individual loan servicer to go about getting a refund for the payment you made.
See Plain Language Disclosure for Direct Subsidized Loans and Direct Unsubsidized Loans
William D. Ford Federal Direct Loan Program
Thank you, that is good to know!
I often return loan funds for my students, because I actively encourage them to return money if they find they don’t need it, after all. Students can return their own money and still have the origination fees and interest canceled if it’s done within the 120 day window, but they have to make sure they request that the money be applied to the right loan (that is why I like to do it for them). The other thing you gain by doing it through the school: If you return the money through the school, you’ll be able to borrow it again later in the year if you find out you are short. For example, let’s say you borrowed $5,500 sub but want to return $2,000. Then March rolls around and your car dies - you need that car to get to class. If you had returned the $2,000 through the school, you can borrow that $2,000 again. If you had returned the $2,000 yourself, you wouldn’t be able to borrow it again.
This is extremely helpful. I didn’t that was an option.
*know