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

UPDATED: Mar 4, 2012

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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


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 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.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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