For many college students, one of the most exciting events in a new semester is not listed on their school’s calendar: Refund Day.
Although the day differs on various campuses, the windfall result is the same: That’s when the millions of students currently taking out federal college loans find out how much of their approved amount is left over after the school has taken its share for tuition and other charges. Students can reject the refund and reduce their debt, or accept the money. Although they are technically required to spend it on education-related expenses, administrators acknowledged there’s no mechanism in place to monitor their expenditures.
“When we ran focus groups, the refunds were always an issue that came up organically,” said Jason Delisle, who helped run the New America research in 2015 and is now a senior policy fellow at the Urban Institute. “The reaction in the room was always, ‘Refund checks—yeah, those are kind of crazy!’”
But scrutiny of the refunds will be a challenge because basic information about them is elusive—including how much they cost and how they are used.
RCI contacted more than a dozen schools, a combination of flagship public universities, private colleges, Historically Black Colleges and Universities, and a community college. Even though they all issue refunds, none was able or willing to provide a figure as to how much they had disbursed in refunds on federal college loans, which remain the primary borrowing vehicle for people financing undergraduate or graduate school.
Refunds can be made to parents or students borrowing for college, a group that comprised 7.2 million people in fiscal year 2021, according to the DOE.
Some schools—such as the University of North Carolina, Louisiana State University, the University of Vermont, the University of Virginia, Spelman College, and Suffolk University—did not respond to requests for information about how much they had refunded to students.
Florida A&M University, a historically black school, did provide the figures for federal loans it disbursed but did not respond to questions specific to refunds.
Other schools, like Ohio State University and Texas A&M, responded to requests but ultimately proved unable or unwilling to provide figures on refunds.
“We do not have data specific to financial refunds for only direct loans broken out,” said Delisa Falks, an assistant vice president at Texas A&M’s Division of Enrollment & Academic Services. “This would require some work and we are not at a place where we have resources to provide this.”
Even scholars who study student loans were scratching their heads.
“This is a super-interesting question and the reality is that there isn’t great information available,” said Adam Looney, the executive director of the Marriner S. Eccles Institute at the University of Utah and a fellow at the Brookings Institute who studies college loans. “Indeed, I feel like it’s something people don’t like to advertise or talk about.”
While the total amount of student loan money refunded each year is unknown, it is almost certainly significant. If 1 percent of loans were refunded, this would amount to $820 million in 2022.
Another indication of their importance is their prominence online. Websites associated with college and financial advice are rife with information on how to apply and receive a refund, all carrying a whiff of free money with only the small print reminding students refunds must someday, in theory, be repaid.
The 2015 report authored by Delisle and Alexander Holt found that many borrowers had mixed feelings about refund checks.
On one hand, “Participants felt that these checks epitomized how easy it was to take out a federal student loan and the bad incentives that entailed, with some commenting that it seemed as if the ‘money wasn’t real,’” the report concluded. “They noted that refund checks were particularly problematic for young and naive students, enabling them to take on debt that they would later decide was not worth it or that they would struggle to repay.”
