It's not too late to return your student loan
Student loans make it all too easy to take out more than you actually need to cover the cost of your education. So you take that leftover money and you start financing your lifestyle choices. Suddenly, student loans are getting used to buy Red Bulls between classes and 24-packs of cheap beer. After all, you've already got the loans and you don't need to spend any more on tuition, so why not use it to cover living it up at college?
Here's the thing: You don't have to keep the money. You actually can return a student loan with no interest or fees charged.
The Option to Return Unnecessary Student Loans
It's within your right as a borrower to cancel all or a portion of your federal student loan with one caveat: You must do it within 30 to 120 days of the date your school disbursed your loan money.
You should be able to realize within 120 days if you really need the full student loan for which you were approved and took on. Keeping just the bare minimum you need for student loans will save you hundreds to thousands of dollars over the life of your repayment journey.
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There are two main ways to cancel federal student loans:
1. Notify your school within a 14-day window after your school tells you that you have a right to cancel the loan or by the first day of your school's payment period. If you don't alert your school before the loans are disbursed, then you still have some resources. The first option is to, again, notify your school within 30 days. Missing these timeframes leaves your financial fate in the hands of your school's financial aid office, which could still elect to return your loans, but isn't legally obligated to do so.
It won't be enough to just call up your school's financial aid office. You'll need to submit your request to return the funds in writing and preferably via certified mail so you can keep a paper trail of your request and prove when you asked for the funds to be returned, just in case there's any issue.
[See: How to Live on $13,000 a Year.]
2. Know that Direct Subsidized Loans and Direct Unsubsidized Loans under the William D. Ford Federal Direct Loan Program are also eligible to be returned. This gives you some longer leeway, as you have up to 120 days to return some or all of your loan. You should contact the Direct Loan Servicing Center for help on how to properly return the loan and avoid paying any fees or interest.
If You Just Repay the Loan
You could just repay the loan if the funds are sitting in your bank account, unused. However, repaying instead of canceling means you will still have at least paid the origination fee and may have allowed some interest to accrue while you debated whether you needed the money.
Ways to Take Out Less in Loans Moving Forward
In addition to taking out loans for only the bare minimum, plus maybe a tiny buffer, you should also strive to minimize the cost of college each year you attend. There are three simple ways to do this:
1. Keep applying for scholarships and grants. Scholarships and grants keep getting awarded long after you graduate high school. You could even be applying all summer before going to college. Once you're in school, keep an eye out for community scholarships, national opportunities and, of course, college-sponsored scholarships. Most colleges offer scholarships and grants to current students, some of which you may not even be eligible for until you advance beyond freshman year. Keep searching and applying for scholarships all four years and be sure to subtract that amount from the total you request in loans.
2. Get on a work-study job or become a resident assistant. Your campus has jobs open to you, as does the local community, so go get one! If you're not eligible for work study, then consider other employment opportunities on campus like being a resident assistant. You could probably shave several thousand dollars a year off your loans.
3. Get a summer job. Use the summer to get a job, be it an internship or not, and save up money for the following semester. These funds can be used to at least fund lifestyle expenses and minimize your temptation to request more in loans just to be able to live it up a little during your college years.
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