Can a school charge me for financial aid funds it mistakenly awarded me?

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Can a school charge me for financial aid funds it mistakenly awarded me?

Due to a processing error, my community college mistakenly allowed financial aid funds to be disbursed to me. After the error had been discovered, I was ordered to pay back the excess funds, which had already been used to pay for 2 semester’s worth of classes and books. Initially, I made attempts to contact people in administration, but soon became preoccupied with finishing my transferring process to a university. I haven’t followed up on the matter for a year and now I’ve been given notice my debt will be sent to a collection agency in 1 month.

Asked on March 4, 2012 under Bankruptcy Law, Texas

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

You say that the funds were "mistakenly" awarded to you--someone's mistake in sending, crediting, or disbusing money to another person does not give that second person a right to the funds. Rather, he or she must repay them. The best thing to have done would have been to have tracked what you were owed at the time and, once you received funds in excess of that, to have returned them immediately. However, since receiving funds in error does not give you any right to the money, you still have to repay them, even though you had spent them on classes and books. The best thing to do now, therefore, is to try to work out some payment schedule; since the school was at error and there is no evidence, from what you write, of wrongdoing on your part, it would be reasonable for them to allow you to develop a payment plan which you can meet. If you can't work out a mutually agreeable payment plan and can't otherwise return the funds due to your financial situation, you can most likely expect to be sued, as well as to have severe credit damage.

You will most likely have better results from reaching out to the school and its collections agency to resolve this, rather than ignoring the matter and waiting for  them to act.


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