Tag Archives: student loans

What you need to know about refund checks

WHAT IS A STUDENT LOAN REFUND CHECK?
Funding for a student’s account comes from a combination of sources including financial aid (student loans, grants and scholarships) and cash payments made to the University.
When a student has more funding on his/her account than the actual  balance due towards the University (for tuition, fees, etc.) that student will receive a check in the mail which carries the students excess balance.

WHO QUALIFIES?
Anyone is qualified to receive a refund check so long as they have taken out student loans in excess of a semester’s Cost of Attendance or have made cash payments in excess of a semester’s Cost of Attendance (or any combination of funding sources in excess of COA).

HOW DO I KNOW IF I’VE GOT ONE?
You will be alerted by the financial aid office if a refund check is waiting for you; this is typically done towards beginning of each semester, after all loans and scholarships have been disbursed (passed on to the students account).  In order to collect your check, you need to present two forms of ID.  

BEST WAY TO SPEND IT?
In an ideal world, all students that receive refund checks would be able to pay the money right back for next semester’s tuition.  If you do not need the money given to you in the refund, have the financial aid office put the check towards your next payment.  DO NOT view it as extra cash — especially if the refund is from student loans, which is money that you will have to pay back eventually, with interest, anyways.  If you can write the check off, a best practice would be to take the entirety of the refund check and use it to pay off a portion of your student loan balance. Make sure you alert the lender that the money is to be used to pay off outstanding interest and whatever is left over should go towards your principal. If you’re reticent to give the money up immediately, place it in a savings account to be used as emergency income at a later date, so that, if the need arises, you have a small income safety net. If you DO need the money, spend it on essential living expenses or educational costs (books, etc.).

A Note About Refund Checks:
University financial aid systems are subject to systematic error, as uncommon as they may seem. You may receive more on your refund check then you should actually be allotted. If you spend this money before double checking with the Financial Aid Office, you may end up paying back some, or all, of that refund check. Always double check with the FinAid office that the refund amount is correct before you cash the check.

Common problems and resolutions:
Late Paperwork: If you waited until the last minute to file your FAFSA and/or apply for student loans, anticipate that your refund check will not be available until later in the semester. Talk to your financial aid office to find out the turn around time. If they cannot give you a specific date, try to find a range, like sometime during the month of October. If you are really late, the refund may take until November, or possibly until the end of the semester.
Paperwork was submitted, but something was wrong: Maybe you forgot to sign something, or forgot to submit a very important form. You may think everything is complete, but it turns out you missed something. Make sure you review all documents, and follow up with your financial aid office early in the semester to make sure things are in order.
The Moral: If you are hoping for a refund check, submit all required info early, and follow up with the FinAid Office to make sure everything is in order. If you are late this year, patiently work with your financial aid office so that everything is done and you know a refund is on the way.

Sign up for a one on one session today!

The purpose of the UMF Financial Literacy Outreach Program is to provide you with the tools to help strengthen your knowledge of your student loans and the financial world we live in. Whether you are a first-year student or a senior graduating in the spring, we have the tools to aid your specific situation. If you are interested in a one-on-one informational meeting, here is what we will cover!

In exchange for ONE HOUR (or less!) of your time we provide a personalized, holistic money management strategy:

  • Determine what amount of debt you will be looking at when you graduate
  • Discuss your options for repaying and lowering this debt
  • A rundown of all the available tools to help reduce your financial burden
  • We can tell you if you qualify to have loans forgiven! (Free money!)
  • Set you up to take control of your financial situation NOW
  • Help you develop a comprehensive budget and savings plan to help direct your financial decisions, and reach your financial goals!
  • Help you ‘find money’ that is being wasted frivolously
  • Provide tools for your financial future
  • This includes online banking, Mint.com, NSLDS.ed.gov, and more!

Email a peer financial assistant or visit us on Facebook to sign up for your own one on one session today!

The BIG Question

How Much Should I Borrow?

What is the appropriate amount of debt to take on for my education? In our economic climate, this is a question that gets asked considerably more often than it did before the Great Recession. It used to be that students would take out gobs and gobs of money with the full confidence that with our economy growing they would land a job that pays well and the loans would be a non-issue. Not so anymore. Financial planning is essential and student loan debt should be a calculated peice of those plans. To answer the question of how much to borrow, consider several factors:

What is my major? How much can i expect to earn in my first year of work after graduation?

The rule of thumb is based on your major; depending on what you are in school for you should be able to figure out the answer to the second question of what you can safely estimate your first year’s salary will be out of college. Based on that figure, you can form an answer to the question of how much to borrow. Generally speaking, Liberal Arts majors should try to avoid borrowing more than $27,000- $35,000 and Math/Science types or Computer Programmers can plan to borrow near double that. Mark Kantrowitz, who runs FinAid.org (a great resource for student loan and indebtedness information) says that if you’re borrowing more than $10,000 a year you need to cut down on loans or, if that’s not possible, transfer to a cheaper institution.

Student Loan Education (communications)

Student Loan Education

On subsidized Stafford Loans, the federal government pays the interest while the student is still in school. On unsubsidized Stafford Loans, the student is responsible for interest while he/she is still in school.

Students may choose to defer paying interest on unsubsidized loans by capitalizing that interest. However students should be very familiar with the process of capitalizing interest and what the implications of their decision to capitalize may be.

What does it mean to capitalize interest?

Capitalizing interest is the process of skipping your interest charges and adding them to your existing principle, or loan amount. As the lender adds the interest charges to your principle, your principle grows. As your principle increases, so does the amount of interest you must pay in the future. While your interest rate remains the same, the amount you pay interest on increases. Just because it gives you a chance to defer payment for a while doesn’t make it a good idea…it is not a free extension on your loans. DON’T CAPITALIZE YOUR INTEREST.

When Does Capitalization Occur?

Capitalization occurs when repayment of the principle loan amount begins. Because any capitalized interest is added to the principle loan amount, your interest payments will remain fixed until repayment of the principle begins, at which time your interest payments will be recalculated to reflect the larger principle amount (principle+capitalized interest)

Example of two students:

Jim and Kim both have $4,000 in unsubsidized Stafford loans at 6.8% interest and have opted for a standard (10 year, fixed monthly payments of at least $50) repayment plan. Both attended school for four years and had a six-month grace period on their loans (54 month deferment period). Jim paid the interest – totaling $1,300 – while he was still in school. Kim made no payments, so the total accrued interest of $1,225 was capitalized at the time repayment began. By avoiding capitalization, Jim saved $690.40 on the total amount of his repayment—enough money to cover a month’s rent or a car payment and a month of auto insurance- that additional $690.40 translates into an extra $0.17 for every dollar borrowed.

How can I calculate the difference in what I owe with and without capitalizing my interest?

There is an easy to use online calculator at finaid.org which can help you to establish the financial implications of capitalizing your particular loans.

Interest Capitalization Calculator- http://www.finaid.org/calculators/interestcap.phtml