What Happens to Leftover Financial Aid Money?

What Happens to Leftover Financial Aid Money?

Have you received financial aid and have an amount of it leftover? Or have you just been wondering what on earth happens to leftover financial aid money? Do you give it back? Who would you give it to? Can you use it for something else? These are all great questions! 

Whatever your reasons for wanting to know this, you are in the right place! In this article, we are going to be taking you through exactly what happens if you have leftover financial aid money, as well as exploring anything else you may need to know concerning this query. 

What is financial aid?

What is financial aid

Financial aid is a sum of money that is given to a student to help you to cover the costs of your education, usually in college. 

Multiple funding sources can be utilized. This financial aid can come in the form of grants, scholarships, and student loans. It may even be a mixture of all of these. 

It is most common for students to combine a mixture of these to cover educational costs. 

That being said, the idea is that if you receive enough money to cover all of your costs from grants (these are based on the needs of a student) and scholarships (these are based on the student’s merit) then you will not need a student loan. 

This is preferable since student loans need to be paid back but grants and scholarships don’t. However, since it is assessed each year by an independent body, there is no telling how much you will receive from each (if any) until the decision is back. 

As such, you must fill out an application with the Free Application for Federal Student Aid (FAFSA) organization. This is run by the federal government, as well as the state government and your chosen school, and they will work to determine what you may be eligible for. 

As some of this money is reward-based, you may find that you have money left over at the end of that academic year. Keep on reading to find out more about leftover financial aid money. 

Can I spend leftover financial aid?

You are encouraged to use up all of your financial aid each academic year. In fact, schools, colleges, and other funding bodies work out the amount they give you based on what they think you will need. 

With this in mind, it is not expected that you will have any left. However, this is not always so straightforward and it is certainly common for people to have some financial aid money leftover.

If this happens to you you may get an overage check come through from your financial aid. You can indeed spend this as it has been assigned to you, but there are rules and regulations about it that you will also need to consider. We will be exploring this in the next section so head on over there to find out more. 

Does leftover financial aid get taxed?

What is financial aid

Yes! Leftover financial aid is at risk of being taxed. If you receive an overage check from your financial aid then the IRS (this stands for the Internal Revenue Service) may count this overage as income. 

As such, this may have to be taxed. You will have to file taxes on it. This may even have a knock-on effect on how much financial aid you receive in the next academic year as it will affect your FAFSA information. 

In order to comply with the rules and regulations of IRA, you should submit all information you have on your taxes relating to the overage to the IRA. This may include telling them about the amounts you have used for all incidental expenses (this may include living off of campus and traveling to school). 

You may also need to tell them about any money you might have received as payment such as if you undertook any teaching or any money from fellowship schemes. Your school should provide you with the relevant tax receipt for this and you will need to file a form (the number is 1040) at the end of the year. 

Can my leftover financial aid get put into my bank account? 

Yes. you may be able to get your leftover financial aid money put into your bank account as a direct deposit. If you happen to have a savings account or even a personal checking account, your school may be able to do this for you. 

You should, however, keep in mind that even when this money is essentially free, for example, if it is from grants or scholarships, it should still be used sensibly.

Ensure to provide accurate information so you get the exact amount needed, and try your best to use it in full every academic year so you are not left trying to deal with the leftover money. 

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