What to do if you get a student loan refund

By Sasha Bulatskaya | Published on March 30, 2026

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One of the most welcome news for college students is that they’ll get a student loan refund. So, how does it work, and who qualifies? First, we need to understand the disbursement process for federal and private student loans.

What is student loan disbursement?

When you take out a federal or private student loan, the funds are typically sent directly to your school to cover tuition, fees, and other educational expenses. Anything left over is considered a refund, but it’s not as simple as getting a refund for something you buy with a credit card.

Your school determines if you’re owed a refund

Once your school receives the loan funds and applies them to your account for the academic year, it will determine if any money needs to be returned. You should be able to check on the status of your refund by visiting your student account.

How long does it take for a student loan refund to be deposited?

There’s no set timeline for getting your refund. It depends on your college, the method of payment, and the type of student loan you have. Here’s a quick breakdown:

1. If you have direct deposit, it will take less time than if you’re getting a check in the mail.
2. Every school has different policies when it comes to processing student loan refunds. Check with your financial aid office to get yours.
3. Some loan servicers have different timelines. If you have a federal student loan, check your loan servicer on studentaid.gov and contact them directly. For a private student loan, you should reach out to your lender.

How quickly you get the refund money depends on how these three things work together. Let’s take a deeper look at how this process works.

How you get your refund depends on three factors

How you receive this refund depends on whether you have direct deposit set up, the policies of your school's financial aid office, and the specific guidelines set by your loan servicer.

Refunds with direct deposit

If you have direct deposit set up, the refund may be deposited directly into your bank account and you’ll be able to see it reflected on your account balance. If direct deposit isn't available, you might receive a physical refund check instead.

Keep in mind that the refund process can differ between federal and private student loans, so let's break it down further.

Refunds for federal student loans

Since federal student loans are a part of your (Free Application for Federal Student Aid)FAFSA federal student aid package, the Department of Education and your school's financial aid office come into play. Once the refund is processed, it can take a few business days for the funds to reach your bank account or for the refund to be mailed to you in the form of a paper check.

Keep in mind that this isn’t free money. It’s still part of your loan. Ideally, you’ll want to return the money to your lender or you can choose to use it for books, or other school-related expenses.

Refunds for private student loans

On the other hand, with private student loans, the process varies depending on your financial institution and its rules.

Quick FAQs: How refunds work at Earnest

When you take out an Earnest private student loan¹, we send the money not to you but to your school. This is a legal requirement to ensure students avoid borrowing more than they need. Here’s how our refunds work:

1. If your loan has already been disbursed to your college but there’s been an adjustment to your account, the funds will be sent directly to you. Once you get the money, you can make a one-time lump sum payment on your loan.
2. If the loan hasn’t already been disbursed (your school hasn’t received the funds), you should contact your financial aid office and ask them to change the disbursement amount.

You can also call our Client Happiness team and get help if you’re still not sure what to do.

Your responsibility as a borrower

When you receive a refund, it's crucial to use the funds wisely. When you take out a student loan, you sign a contract that you will only use your loans for educational expenses. Using the money for something else could be considered a breach of contract.

Consider returning the extra money if you can

You should also consider your future loan balance. If you return the refund to your lender, you’ll have a lower loan balance and less interest to pay off. This is especially important if the interest rates on your student loans are high because interest can keep you in debt longer.

Reach out to your school's bursar’s office or financial aid office. They can help you with the next steps.

Make sure you’re covered with or without a refund

Understanding how student loan refunds work for both federal and private student loans could help you avoid unnecessary student loan debt once you graduate. By being proactive and staying on top of your educational finances, you can make decisions you’ll be thankful for later in life.

PS. If you’ve taken advantage of federal student aid–like Pell Grants, scholarships, and federal student loans–but still have leftover costs, a private student loan could help. You can check your rate for an Earnest loan, and use our repayment calculator to see what your payments could look like.

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About the Author

Sasha Bulatskaya

Sasha is the Senior Manager of Brand and Content at Earnest. She has been writing for ten years and has been focused on educational finance and financial aid for over three. Her passion for mission-driven companies brought her to Earnest in 2020, and she's been helping make student finance more accessible ever since. She strives to demystify personal finance and student loans to help borrowers make the best decisions for their financial situation.

Disclaimer

This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.

1Before applying for private student loans, it’s best to maximize your other sources of financial aid first. It’s recommended to use a 3-step approach to assembling the funds you need: 1) Look for funds you don’t have to pay back, like scholarships, grants, and work-study opportunities. 2) Next, fill out a FAFSA(R) form to apply for federal student loans. Federal Direct subsidized and unsubsidized loans, excluding PLUS Loan for Parents and PLUS Loan for Graduate and Professional Students which require a credit check and a credit worthy endorser if the parent or graduate or professional student has adverse credit, do not require a credit check or cosigner, and offer various protections if you're struggling with your payments. 3) Finally, consider a private student loan to cover any difference between your total cost of attendance and the amount not covered in steps 1 and 2. For more information, visit the Department of Education website athttps://studentaid.gov/.