When you received your school’s financial aid offer it most likely included a federal student loan offer. In order to accept your financial aid package you signed a Master Promissory Note (MPN), which outlines how your loan money will be disbursed or, in other words, paid out. According to the MPN, you can cancel all or part of your student loan before or after the money has been disbursed.
Canceling Before Disbursement:
Before your loan money is disbursed, you may cancel all or part of your loan at any time by notifying your school. You will need to contact your school’s financial aid office to confirm their process for cancellation.
Canceling After Disbursement:
After your loan money is disbursed, there are two (2) ways to cancel all or part of your loan:
1. Within certain timeframes you may notify your school that you want to cancel all or part of your loan. The timeframes for notifying your school are different depending on whether your school requires you to confirm in writing the types and amounts of loans you want to receive.
- These timeframes range from 14 days to 30 days after your school notifies you of your right to cancel all or part of your loan. Your school will tell you the specific cancellation timeframe that applies to you. If you tell the school that you want to cancel all or part of your loan within the applicable timeframe, your school is required to process your cancellation request.
- If you ask your school to cancel all or part of your loan outside the applicable timeframe, your school may process your cancellation request, but it is not required to do so.
2. You may return all or part of your loan to the U.S. Department of Education or their servicers. Within 120 days of the date your school disbursed your loan money, you may cancel all or part of your loan by returning all or part of the loan money to the U.S. Department of Education or their servicers. Contact your servicer for instructions on how and where to return your loan money.
Note: You do not have to pay interest or the loan fee on the part of your loan that is cancelled or returned within the timeframes described above. The U.S. Department of Education or their servicers will adjust your loan amount to eliminate any interest and loan fee that applies to the amount of the loan that is cancelled or returned.
With a background in taxation and financial consulting, Alia Nikolakopulos has over a decade of experience resolving tax and finance issues. She is an IRS Enrolled Agent and has been a writer for these topics since 2010. Nikolakopulos is pursuing Bachelor of Science in accounting at the Metropolitan State University of Denver.