If you are already thinking about what happens if I don’t use all my financial aid money, you have already got some federal financial aid or student loan in your hands.
Don’t worry: according to US federal regulations, you can use this money to cover any extra educational expenses you need to bear without any restrictions. These expenses include books, living expenses, and more.
You will have to pay back the money eventually if you borrowed any of these funds, but it will definitely not be a problem for you. The only way to use your federal financial aid is by spending it on something that actually helps you get through college without additional financial issues. So, rest assured things are under control!
If you are not yet familiar with how student loans or scholarships work, don’t worry: here is everything about them, in short. If you already know all about this stuff and want some other useful information (including what happens when I do not use all my financial aid money), continue reading below.
Here's what happens if I don’t use all my financial aid money and what to do:
First of all, if you do not use your financial aid money, it is not going back to the Department of Education. In fact, you have a lot more opportunities with this money than just using it for paying your tuition and other educational expenses. For example, some people use their financial aid refunds to pay for a part of their living expenses when they go to college in a different city or state from where they usually live. They can also choose to use their federal funds to help cover any unexpected expenses that may come up during the school year.
Let’s say you get $2,000 in student loan per semester but only spend $500 on school stuff: there is no one checking whether or not you actually spent the rest of this money on your living expenses.
The only way for the US Department of Education to find out is by you telling them, so feel free to do it if you want.
When will I start repaying my federal financial aid loans?
You probably have already got some student loan or other form of tuition funding before starting college. Even if you did not get any help from the federal government, there are countless private organizations that offer people who wanted to get degree access to their own personal loan programs. If you are dead set on getting a college education but cannot afford to pay for it yourself, consider asking someone close to you for some help. They might be willing to lend you some money without too many strings attached so you can pay for living expenses and tuition without any problems.
There are always options, no matter what the circumstances might be. And don’t forget – you can use your money to cover anything you need to get done before graduating. So, let’s say you need some new equipment for a science lab: there is nothing stopping you from using your financial aid funds to pay for it. The last thing anyone would want is not finishing college because they were too busy sinking all their money into school-related things instead of actually paying attention in class or going out with friends now and then.
Your federal financial aid will just sit there doing nothing instead of helping you through college if you do not use it on something that furthers your educational efforts.
The money is there to help you get a college diploma, and it will be of no use to anyone if you do not use it on something that leaves you better off than before entering college. Even if all your federal financial aid goes down the drain, don’t despair: simply ask someone close to you for some help and make sure they know what exactly this money is intended for. If you are low on cash but high on motivation, nothing can stop you from paying your own way through university and enjoying life along the way!
Can I get a refund?
Whether or not you will get financial aid depends upon the amount of financial assistance you are going to receive in the first. Technically, you are not going to get the cheque for all of the financial aid. Your school or college will be the one receiving that on your behalf.
Once the aid money covers up the educational and living expenses, there is a chance that you may get some excess amount as a refund directly from the school. The recipient can further use this money to cover up any extra charges/bills related to education.
Keep in mind that most schools and colleges will not refund you the entire financial aid amount. The school is entitled to keep a certain percentage of the funds for administrative charges, so be prepared for this situation.
Also, most schools and colleges require you to be enrolled full-time (at least 12 credits) during the academic session to qualify for any refund. If you fail to meet this condition due to any reason, do not expect too much from your school or college when it comes to getting some financial aid refund out of them!
If you need money for food and clothing, there are other sources aside from federal student aid programs. Try asking someone close for help: they might be more than willing to give you a lending hand without too many strings attached. Federal education loans can be repaid once your college diploma is received, so there are no worries regarding interest rate or credit score.
If you have to pay for tuition fees, living expenses, books/materials, and other needs related to a college education but do not have enough money of your own, federal financial aid loans are the most appropriate solution for this problem. Colleges often consider students who do not have their own funding sources as deemed-worthy applicants worthy of getting financial aid. If you cannot afford to pay for your college education on your own, there is nothing wrong with asking someone close to lend you some money without any strings attached!
Do keep in mind that if your school gives refunds directly back to the student (in whole or in part), the loan money may be considered income to you, which can have tax implications.
What can I do with the leftover financial aid money?
Generally, there are no hard and fast rules dedicated to the things you can do cannot do with this money. This is the very reason why most of the students are always asking, ‘what happens if I don’t use all my financial aid money?’
If you are talking about the federal administered grant programs/loans, you can do whatever you like with the leftover money, but it will be considered your income. You can even use the leftover amount other than educational expenses as part of your income after showing the amount as ‘income’ in your tax returns.
There are some cases when the student does not have to pay back any of their loans. This is because you cannot receive a refund from many colleges or universities if the federal loan money is used for tuition fee payments, educational supplies and other expenses directly related to a college education. If you do not want to use this money on your college education, try asking someone close for help!
If you have applied for an external/private loan along with your financial aid package, this might come as a surprise: usually, these loans carry many different rules. An external/private loan cannot be touched until after graduation, so there is no chance of using it before reaching that stage in life! In addition to this piece of information, these loans typically have higher interest rates, so think about it very carefully before you decide to borrow money this way.
It is possible to use the leftover amount as non-educational expenses if your school or college allows refunds directly back into student accounts. It is always preferable to use the leftover financial aid money for covering up any other extra charges related to education. For example, you can buy supplies needed for classes, books, and other stuff like laptops, etc., which are required on a regular basis throughout the academic session. This will free up some of your own funds for irregular expenses like clothing and food!
What happens if I don’t use all my leftover financial aid money in time?
The excess federal education loan that has not been spent for its intended purpose (tuition fee, living expenses, and other educational costs) will be returned back to the federal financial aid program. The returned amount will be available for your school to award as financial aid in future years.
Do remember that the unused portion of non-federal grants (like Pell Grant or SEOG) is not part of the student’s income; there are no taxes involved either.
Most students who do not use all their financial aid money end up saving it for later. If you plan on doing some big work like renovating your house or buying a car after graduation, you can put this remaining money towards something like this and still have some cash leftover! Don’t forget: you won’t get another chance at either receiving college financial aid or have some leftover money to spend!
What happens if you don't use your FAFSA money?
If you don't use your financial aid money, it will go to waste. That's why it's important to carefully consider how you will spend your FAFSA money. You don't want to end up with a bunch of debt that you can't afford to repay. Financial aid can be a great help, but it's not free money. You have to be careful with it so that you don't end up in a worse financial situation than you were in before.
Do I need to return this money?
The answer to this question depends upon the type of grant/loan you have been awarded. Most federally administered grants, such as the Pell Grant, etc., allow you to use the leftover for various expenses, both educational and personal.
In some cases, you may even find some excess amount under a student loan program. Now, you can choose to keep this amount in a school/college administered account to be used in the future to repay the loan installments, or you can even transfer the whole amount into your bank account to be used as you want.
Will there be tax involved?
If you are looking for a one-word answer, then yes. According to rules set up by the federal authorities and stun loan bodies, any excess amount from financial aid must be shown as an income in your tax returns. In other words, you will have to pay tax on this extra amount.
If you were thinking about what happens if I don’t use all my financial aid money just because you wanted to use the leftover amount for personal expenses, you must keep a record of everything you are spending. You can get a refund for any tax you have paid for ‘educational expenses’ at the end of each financial year.
Final Note
Today, the US is facing a whooping 1.6 trillion USD student debt crisis. Sadly, the majority of such people facing the student debt crisis are the ones who knew exactly the answer to ‘what happens if I don’t use all my financial aid money?’ Still, they decided to spend all of the leftover money on expenses that were not necessary instead of saving up for the loan repayment.
So, if you are someone who has got some excess amount from the financial aid, do think and read thoroughly about the policy of your financial support and where you should use this amount.