What You Should Do with an FSA Credit Balance Refund

By Ryan Laspina
Senior Specialist, Red Flags and External Reviews, APUS

When Federal Student Aid (FSA) is paid out, those funds are applied toward your tuition and fees for the entire semester. But in the event that the FSA funds exceed what you owe, you may end up with an FSA credit balance and receive a refund that can be applied to additional educational expenses.

Type of Refund Varies by FSA Package

Your FSA package determines whether or not you will receive a credit balance refund. If your package includes Cost of Attendance (COA) that covers additional educational costs, there is a good chance you’ll receive a refund. COA is a calculation of the total amount of educational costs that you incur each semester, such as tuition, books, fees and personal expenses.

However, if you requested the Cost of Tuition (COT) package only, there is no credit balance refund. In this case, FSA only covers tuition and fees. COT is the actual cost of your tuition, which includes some fees associated with the classes you select.

Be Careful Not to Confuse a FSA Credit Balance Refund with Other Refunds

An FSA credit balance refund should not be confused with other types of refunds. For example, dropping out of school or withdrawing from a course might result in money coming back to you.

You may also receive a refund if you utilize other forms of financial aid, such as military tuition assistance, external scholarships or alternative loans. Remain aware of what type of refund you receive; some financial aid needs to be paid back and some may not.

FSA Credit Balance Refunds Can Only Be Used for Education

Once you receive your FSA credit balance refund, you are permitted to spend it only on educational needs. For example, you could invest in a good laptop with your first refund check, which would benefit you throughout your academic program. Other acceptable purchases include:

• Any software needed to complete college courses
• Textbooks
• School supplies, including notebooks, writing utensils and ink cartridges
• Babysitters if you need childcare during class

Remember that FSA credit balance refunds should not be treated like a windfall. They are funds that should only be spent on educational needs.

But if you do not have any other educational needs or expenses, consider using these funds to pay down any student loan debt you may have. This will help you reduce your total student loan debt.