Shopping Spree 101: How Refunds of Federal Loan Overpayments Leave Student Borrowers With Your Money to Burn – By James Varney (RealClearInvestigations) / Jan 10, 2023
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.
“I’m 23, if you give me a refund check, I’m going shopping,” one Philadelphia student told a focus group about student loans and debt relief run by New America, an education think tank. “I don’t understand what that means – You just gave me free money. And no one’s stopping me ‘cause it comes to me.”
Some education experts say the issue of student loan refund checks should receive more attention as the Biden administration seeks to erase perhaps $400 billion of the $1.7 trillion in student loan debt held by the federal government, meaning taxpayers. The Biden tuition debt-forgiveness plan is already controversial and headed to the Supreme Court, but the notion that some of the erased debt might have been used to pay for trips, video games, or gifts could strike some taxpayers as particularly galling.
