It’s happened to all of us. We’ve bought something we wish we hadn’t. The purchase seemed like a great idea at the time, but in retrospect it was a poor money decision. If we’re lucky, we realize this within the return policy time frame. If we’re not, we’re stuck with the purchase and out the money it cost us.
This is buyer’s remorse. It’s not an uncommon experience in a society where we’re inundated with marketing messages promoting immediate gratification. It’s also not an uncommon feeling amongst recent grads who are looking over their loan balances upon graduation.
There is a way to for current college students to free themselves from some of that guilt and lessen your burden after you complete school. It’s much akin to taking that amazing coffee maker back to the store, receipt in hand, except resolving buyer’s remorse on your student loans could save you thousands of dollars instead of one hundred.
Funding Lifestyle Over Education Ends in Buyer’s Remorse
Many times when you’re in school, you’ll be eligible for loans in excess of your tuition and fees. When these loans are disbursed to your school, the financial aid office will see the difference and cut you a check for the excess. When you receive that check, it can feel like manna from heaven. On a tight student budget, anything extra can help you have a social life, update your wardrobe, or even travel.
When you accept this money, though, you’re also agreeing to interest rates and loan origination fees. Let’s say one semester you get $2,000 back. Under current rates on federal student loans, you’ll be paying back $21.46 in origination fees and $423 in interest over the course of the loan, for a grand total of $444.46. If you return that money, not only do you not have to pay that $444.46, but you also won’t owe the original $2,000 principal.
Long term, saving that $2,444.46 may not seem like a big deal, but let’s say you did it every semester. If you complete your degree within four years, that would mean taking out $16,000 in student loans. Origination fees would add up to $171.68. Total interest paid on a standard repayment schedule would be $3,705. After you are done paying off your loans, you’ll have spent $19,876.68 not on your education, but on funding your lifestyle.
If this seems like a bad idea to you, there is a resolution. You can return that excess portion of your federal student loans. The return will erase any origination fees, and reduce the amount due upon graduation, which eliminates that interest you would have been paying.
Returning Student Loans
After your student loans are disbursed, you have 120 days to return the money to your lender. Schools may have a shorter time frame to help you facilitate that process. Some institutions require that you submit your written request to return the available balance within as little as fourteen days of the date on your disbursement notification. If you miss this small window, you can still return your loan, but you will have to handle the return directly with your lender rather than having the school handle it for you.
It’s important to note that the date on your disbursement notification versus the actual date of disbursement may differ. If you wait until the tail end of the 120 day period, it will be vital to know the exact date of disbursement. Don’t rely on the notification letter alone.
Initiating the Process
Whether you are completing the process through your school, or directly through your lender, it is mandatory that you submit your request to return the money in writing. Simply telling someone in your financial aid office of your intent, or talking to your lender on the phone will not suffice.
In order to make the request, you can mail a letter to your financial aid department. If you do this, it is recommended that you send the letter via certified mail to ensure you have the date of delivery in your own records. If your school fails to return the money on time, you will then be able to get an extension past the 120 day mark because the error was perpetrated by the school. If you do not have evidence of when the letter was received, you can’t make a case for the extension.
The Federal Government also allows you to submit your request via email. Check with your financial aid office to make sure this practice is in keeping with their individual school policies. The email will have a time stamp, which should be sufficient for your records as long as your school has a history of communicating important, aid-related information to students in this medium. Whether you send a letter via snail mail, or email, best practice would be to follow up with the office to be sure they received it, and have begun processing.
Don’t Fund Today at the Expense of Tomorrow
It can be extremely tempting to take that money. You anticipate making more when you get out of school, and think the potential increase in income will make paying off those loans easy. These lifestyle loans are not the only thing you will be paying off, though. You’ll also be paying off tuition, fees, and, where applicable, room and board. Those are massive bills, and anything you can do to alleviate your future burden will ultimately be a gift to your future self. In the case of $2,000 per semester, it will give you an advantage of almost $20,000 less in debt.
If you don’t know how to make ends meet while you’re in school, learn to budget. If returning those loans means you don’t have any money to budget with, seriously consider picking up a part-time job. Living on a shoestring is tough, but it’s much better than financing today at the expense of tomorrow.