Can I give back loan money that I don't use?

[13132]

I tried to search the forums for this, but didn't have much success. Also, most of the FAQs about educational loans don't really address this.

What if I determine that my living expenses will be 24k/year, so I take out loans based on that amount. Towards the end of the year, I discover that I only spent 20k and have 4k left over (assuming full usage of the loans going towards tuition and fees). Can I just send that 4k back to the government so that interest doesn't accumulate on it?

I guess I could look at it like that is 4k less that I have to borrow for the next year, but lets say I have a summer stipend from a research program of am traveling abroad. Why would I want this 4k to sit around and grow?

Conversely, if I take out too much (but still below the max) can I tell my Office of Financial Aid in order to get more?

Anyway, any insight into this would be greatly appreciated.

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[snowflakes]

A financial aid officer at a med school recommended to everyone at the session to take out the low end of how much loans you'll need. She said interest begins accumulating as soon as you take out the loan, plus it's tempting to increase your spending habits when you have the money in your bank account, ready to spend. She said that the average turn around time for requesting more loans was about 2 weeks (as long as you're still below the max), and she could speed it up to 2 days if you were in a tight spot. So, it's much better to request more loans than to end up taking out more than you really need.

I'm not 100% sure, but I think if you try returning the money, you'll still have to pay whatever interest has accumulated on them in the time since they were distributed.

 

[Ismet]

You cannot return the money. Take out the minimum you think you need, and you can always borrow more at anytime during the year up to the COA for your school.

 

[Plecopotamus]

I tried to search the forums for this, but didn't have much success. Also, most of the FAQs about educational loans don't really address this.

What if I determine that my living expenses will be 24k/year, so I take out loans based on that amount. Towards the end of the year, I discover that I only spent 20k and have 4k left over (assuming full usage of the loans going towards tuition and fees). Can I just send that 4k back to the government so that interest doesn't accumulate on it?

Conversely, if I take out too much (but still below the max) can I tell my Office of Financial Aid in order to get more?

Anyway, any insight into this would be greatly appreciated.

I'm not 100% sure, but I think if you try returning the money, you'll still have to pay whatever interest has accumulated on them in the time since they were distributed.

Edited: Given different answers, I don't want to provide misinformation if something has changed or is school-specific regarding returning of loans.

If you initially take out your loans and have not maxed out your eligibility, you can take out more during most of the semester up to your maximum approved loan amount.

The dates of the semester as defined for the loans don't always match up well with the dates you're actually in school and feel are the beginning/end of the semester, b/c med school is a little wonky and doesn't actually run on a semester schedule. If the lender thinks the semester is over by their definition, you've lost the ability to take out more money -- this isn't a problem after the first semester, b/c you have the disbursement for the 2nd semester soon. However, if during 2nd semester you haven't taken out enough to pay your expenses for the summer, you'll be SOL . . . so don't be too tight with yourself 2nd semester.

 

[circulus vitios]

You cannot return the money. Take out the minimum you think you need, and you can always borrow more at anytime during the year up to the COA for your school.

I heard that you can return the money, but only within two weeks after receiving your money in August.

 

[Plecopotamus]

.

 

[circulus vitios]

After your loan disbursement, there is a period that lasts until relatively late in the semester at which time you can return any loan funds and it is like you never took them out -- you pay no interest on those returned during that period.

If you initially take out your loans and have not maxed out your eligibility, you can take out more during most of the semester up to your maximum approved loan amount.

The dates of the semester as defined for the loans don't always match up well with the dates you're actually in school and feel are the beginning/end of the semester, b/c med school is a little wonky and doesn't actually run on a semester schedule. If the lender thinks the semester is over by their definition, you've lost the ability to take out more money -- this isn't a problem after the first semester, b/c you have the disbursement for the 2nd semester soon. However, if during 2nd semester you haven't taken out enough to pay your expenses for the summer, you'll be SOL . . . so don't be too tight with yourself 2nd semester.

Are you sure? As of a few years ago, all Stafford and Grad PLUS loans are now unsubsidized. http://www.usnews.com/education/bes...13/grad-students-to-lose-federal-loan-subsidy

 

[13132]

Seems to be some variation in what people have said. I emailed my schools financial aid person, and I'll post the answer he gives in this thread. I think it may be helpful for other people.


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[Plecopotamus]

Are you sure? As of a few years ago, all Stafford and Grad PLUS loans are now unsubsidized. http://www.usnews.com/education/best-graduate-schools/paying/articles/2012/03/13/grad-students-to-lose-federal-loan-subsidy

Yeah, I'm positive that's the way it was for me since I did it. Given the varying responses, however, I'm wondering if there's some variation depending on your school's own financial aid office and how they handle the disbursements, so I removed my response above, b/c I don't want to give any misinformation.

 

[13132]

Yeah, I'm positive that's the way it was for me since I did it. Given the varying responses, however, I'm wondering if there's some variation depending on your school's own financial aid office and how they handle the disbursements, so I removed my response above, b/c I don't want to give any misinformation.

Just the fact that so many varying responses were given is surprising. It is shocking that such important information about huge financial decisions just isn't clear or readily available.

 

[Ismet]

I heard that you can return the money, but only within two weeks after receiving your money in August.

Yes, there is a certain window of time where you can make changes. But in OP's hypothetical, you can't give back the remainder of the loan money you don't use after 1st year.

 

[OrgasmicChemistry]

I'd be surprised if the origination fee could be reclaimed (that's a hit you've already taken), and also surprised if you didn't have to return the funds with interest. So, whether you can return it and whether it is financially wise to return it may be two different things.

Def funny how you get such a variety of answers... maybe this is a policy that varies by school?

 

[13132]

I can't copy and paste the email I just received due to the confidentiality disclosure included, but I will summarize.

First of all, you can take out money as you go, which I think everyone was in agreement on. Secondly, my financial aid contact said that you can return money to the Office of Financial Aid and then they return that to the Department of Education. Alternatively, you can simply ask to have your future disbursements decreased (my school has 3 disbursement dates). I think the latter sounds like a better idea.

DISCLAIMER: This is the response I got from my school's Office of Financial Aid. It is becoming apparent to me that not all schools function the same, so I would take what I posted with a grain of salt. I recommend you email your financial aid contact if you have any questions.

 

[Selladore235]

I can't copy and paste the email I just received due to the confidentiality disclosure included, but I will summarize.

First of all, you can take out money as you go, which I think everyone was in agreement on. Secondly, my financial aid contact said that you can return money to the Office of Financial Aid and then they return that to the Department of Education. Alternatively, you can simply ask to have your future disbursements decreased (my school has 3 disbursement dates). I think the latter sounds like a better idea.

DISCLAIMER: This is the response I got from my school's Office of Financial Aid. It is becoming apparent to me that not all schools function the same, so I would take what I posted with a grain of salt. I recommend you email your financial aid contact if you have any questions.

Thanks for inquiring about that, msquaredb. I was curious about that too.

 

[MrLogan13]

You could just pay the money back toward your principal balance, no?

 

[13132]

You could just pay the money back toward your principal balance, no?

This is what my family asked me, and I have no idea if you can. Even if you could would it be advantageous to pay off a loan with borrowed money? I know very little about this type of financial stuff, so trying to think through what that means kinda melts my brain.

If you take out 100k and don't use 10k. Would paying 10k on your 100k principle be the same as giving back 10k? I dont think that not using 10k makes your principle 90k. Thats be like free money.

 

[MrLogan13]

Depends how long you too to pay that extra $10k back. If you waited until the end of the semester, then you would have accrued the 4 months of interest on a $100k of loans.

This is what my family asked me, and I have no idea if you can. Even if you could would it be advantageous to pay off a loan with borrowed money? I know very little about this type of financial stuff, so trying to think through what that means kinda melts my brain.

If you take out 100k and don't use 10k. Would paying 10k on your 100k principle be the same as giving back 10k? I dont think that not using 10k makes your principle 90k. Thats be like free money.

 

[13132]

Depends how long you too to pay that extra $10k back. If you waited until the end of the semester, then you would have accrued the 4 months of interest on a $100k of loans.

I see.

For my purposes I am going to use a conservative estimate and request more if I run out. I think that this will allow me to tailor how much money I borrow as closely as possible to my actual expenditures.

 

[ace12345]

This is what my family asked me, and I have no idea if you can. Even if you could would it be advantageous to pay off a loan with borrowed money? I know very little about this type of financial stuff, so trying to think through what that means kinda melts my brain.

If you take out 100k and don't use 10k. Would paying 10k on your 100k principle be the same as giving back 10k? I dont think that not using 10k makes your principle 90k. Thats be like free money.

I'm fairly sure that if you return the 10K early in the process, it is effectively like giving it back. If you use the 10K to pay down the loan, it would not be exactly like giving it back because there would be a hit from the origination fee and any accrued interest (For Fed Direct this wouldn't be a huge amount after one year, probably somewhere in the neighborhood of 600-700 dollars depending on when you pay down, but for Grad Plus it would be more substantial). As others have said, it also appears this situation can be remedied by lowering disbursements later in the year (Second semester).