When you fill out the Free Application for Federal Student Aid (FAFSA), a formula calculates how much aid you are eligible to receive. Your financial aid package not only considers tuition, but also the cost of related educational expenses, such as housing, food, transportation and supplies. Therefore, in some cases, you will get a financial aid refund to help you pay for the related expenses.
Eligible for Refund
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Not all students receive left-over financial aid money. When you fill out the FAFSA, the formula calculates your Estimated Family Contribution (EFC), which is the amount your family is expected to pay. Financial aid only covers the difference between the EFC and the total cost of attending school. When your financial aid amount is less than the cost of tuition, your family will be billed for the remaining amount and will also be expected to pay for the related educational expenses. It is only when your total tuition bill is less than your financial aid award that you get a refund.
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Time Frame
Each college has different policies for when to send out financial aid refund checks. The federal government only requires that colleges send refunds at least once per academic term. Some colleges will send it a few days before classes begin, whereas others wait until a couple weeks after classes start to get an accurate calculation of your tuition based on the number of classes you are enrolled in after the end of the drop-add period. Contact your financial aid administrator to find out the expected refund check date at your school.
Electronic vs. Paper Check
Many colleges allow students to sign up ahead of time to have the refund check electronically transferred to the student's bank account. This makes the funds immediately available for use on the day they are disbursed. Students who do not sign up for electronic transfers will likely have the checks mailed to them, which delays receipt and also requires that the student go to the bank to make a deposit.
Allowed Expenses
All financial aid received from the federal government must be used for the educational expenses allowed by the government. Of course, tuition and fees billed by the college are allowed. In addition, students can use the money for basic living expenses, which is either on-campus room and board or off-campus housing and food. Students can also use the left-over financial aid money to buy their required books and any supplies that they need for school. Students who commute to school can use the money for gas or bus fares, and students who live on campus can use it to get to and from school each semester. Lastly, students who are responsible for the care of their dependents can use the money to pay for day care while they are in school.