Parent PLUS Loan Refunds: What It is, How it Works

Are you a parent navigating the maze of Parent PLUS loans to fund your child’s education?

You’re not alone.

But here’s a twist: you might get money back.

Yes, we’re talking about Parent PLUS Loan refunds.

Ahead, we’ll decode what these refunds are, why they happen, and who can get them.

A Parent PLUS Loan refund occurs when the loan amount sent to your student’s school is more than the total educational costs, like tuition and fees. The overpayment or extra money is then refunded to the Parent PLUS Loan borrower, usually the parent.

Related: How to Cancel a Parent PLUS Loan

• Excess Aid: Your student could receive more financial aid than expected, making the loan amount disbursed greater than the total charges.

• Change in Expenses: If your child drops a course or other fees are adjusted, the balance might tip in your favor.

Both parents and students can be eligible for a Parent PLUS refund. But who gets the money depends on choices made during the loan application.

If you’re the parent borrower:

• You receive the refund by default.

• You can opt for electronic refunds to your bank account or have a paper check mailed to you.

If you designate your student:

• The refund goes directly to your student’s account.

• The student will receive it via direct deposit.

In either scenario, eligibility kicks in when the Parent PLUS Loan amount exceeds the total educational costs on your student’s account.

Applying for a Parent PLUS Loan comes with key decisions that influence both how the loan covers educational expenses and how refunds are handled.

When filling out your application on the Federal Student Aid website, StudentAid.gov, follow these options:

1. Authorization to Use Funds for All Charges:

   • Why It Matters: Checking this box allows the loan to cover not just tuition and housing but also other fees like parking fines.

   • What Happens If You Don’t: Essential costs will be covered, but miscellaneous fees may still be due.

2. How You’d Like to Receive a Credit Balance:

   • To the Student: Choose this if you want any credit balance to go directly to your child. The refund will be sent via check or direct deposit.

   • To Me (the Parent): Choose this if you wish to receive the credit balance Expect a check mailed to your permanent address, usually within 7 to 10 business days after the loan is disbursed.

Note: Direct deposit may not be an option for parents at all schools, and policies can differ.

Getting a Parent PLUS Loan refund can vary depending on the college or university, but there’s a general framework you can follow. Here are the typical steps:

1. Check for Credit Balance: First, ensure that the loan disbursement overshadows the total charges on your student’s account, leading to a credit balance.

2. Designate the Recipient: When filling out the loan application, state whether you or your student should receive the refund.

3. School-Specific Guidelines: Contact your child’s financial aid office to understand their specific refund process. Some schools have their own online platforms for this.

4. Refund Methods for Parents:

   • Electronic Refunds: If the school allows, log in to their authorized refund portal, find the “Electronic Refunds” section, and follow the prompts.

   • Paper Check: If you skip the electronic option, expect a paper check mailed to your address.

5. For Student Recipients: If the school permits and you’ve designated your child, the refund will be directly deposited into their account.

Timing and School Policy: Generally, refunds are issued 7-10 days post-disbursement. But this can differ based on the school’s policy. Always check with the financial aid office for the most accurate timeline.

How you get your Parent PLUS Loan refund can depend on your school’s policies. Generally, there are three main methods:

1. Digital Disbursement via Zelle: Some schools offer this quick and convenient option. The refund goes directly to the parent’s bank account. Check with your child’s school to learn how to enroll.

2. Paper Check: This is the default method for parents who don’t pick electronic methods. A paper refund check will be mailed to the address provided during the loan application.

3. Direct Deposit:

   • For Students: If you’ve designated your child, the refund usually goes to their account via direct deposit.

   • For Parents: Some schools also allow parents to receive direct deposits.

Check Your School’s Policy: Always consult your child’s financial aid office to confirm which methods are available. This will ensure you choose the best option for your situation.

Received a Parent PLUS Loan refund and wondering how to use it legally? Let’s get into it:

1. Cover Educational Expenses: The refund should mainly be used for tuition, room and board, books, supplies, and other qualifying educational expenses.

2. Prepay the Parent PLUS Loan: You can also use the refund to make an extra payment on your Parent PLUS Loan, reducing your overall interest and shortening the repayment

What You Can’t Use the Refund For:

• Paying Off Other Debts: Using the refund to pay off credit card debt or other personal loans is not allowed.

• Investing: Starting a small business or investing in the stock market with a refund is off-limits.

• Unrelated Expenses: Expenses like family vacations, buying a car, or shopping sprees are not considered educational expenses and are therefore not allowed.

Legal Reminder: Parent PLUS Loan funds are intended to cover educational costs that aren’t met by your child’s other financial aid. Misusing the funds can violate the terms of the Master Promissory Note you signed, so always use the refund for its intended purpose.