The Refund Check

Updated: Dec 8, 2020

Lots of borrowers use the word “refund” when they get a distribution of the remaining money from their student loans. In reality, the “FASFA refund, financial aid refund, student loan refund” was not meant to be used for fun or entertainment but rather your education or essential living functions.

Students spend this “refund” like a tax refund. “I spent my financial aid refund on a skiing trip”, says on PA student. Never mind if spending a tax refund as a student on a trip is a sign of poorly managed finances…Financial aid is not even money like a tax return. IT IS MORE DEBT! The refund is merely taking out a loan for a trip or other lavash purchases.

IT IS NOT YOUR MONEY! Semantics aside, it is a glimpse of why I keep running into PAs who owe $150,000 in student loans only paying the minimum payments. The money you are spending doesn’t even belong to you, it belongs to the FUTURE you. Is the future you going to appreciate the way you’re spending their money?

As the Rule of 72 says, an investment or debt with an interest rate of 7.2 doubles every 10 years. How many times will your PA school debt double from the time you begin borrowing at age 23 and the time you pay them back at 33 or even 43? In reality, lots of PAs are paying 2X the sticker price for everything they buy on student loans in PA school. So, spend carefully…


Pick a specialty you can reasonably get a job as a new graduate. This should be a job you can earn a good starting salary, get the necessary training and experience needed to succeed.

Minimize the size of your PA School Debt.

If you are married, send your spouse to work. If you are not, get a roommate (or 2).

Ride a bike and utilize public transportation. If you must have a car (especially if you have to borrow for it), keep the cost between $5-7.5K. You can get another one later but may be pleasantly surprised it will get you through 2.5 years of school.

Consider a job. It may only be 20 hours a month. 5 hours/week x $12/hr = $7,200 over 2.5 years. This is $7,200 less you have to pay interest on.

Pack your lunch and avoid restaurants.

Borrow books or get used books.

Borrow equipment (or at least the most expensive ones),

DO NOT build an emergency fund with borrowed money!

What until you NEED money before you borrow it so the interest clock doesn’t start ticking early.

Avoid credit cards! In rare occasions, 0% APR deals may be necessary but this should never be the first option.


Live in an inexpensive location. Living in a place you can actually afford can make you surprisingly happy. This conversation can make some students and new graduates become angry. If you plan to move, pick three destinations and pick wisely…

The Right way to use student debt. Make a written budget with all your known, projected expenses. Don’t be too tight or you risk failing. You won’t be an expert when you begin, but will be by the time you graduate.

Determine How Much You Need To borrow

o Now that you know your expenses, subtract any income you may have from your partner, your job, scholarships, or any periodic help from your family.

Determine How Much You CAN borrow

o Compare this number to the amount you can borrow. Generally speaking, you can borrow up to the cost of attendance, which is usually quite generous. This is not necessarily all federal student loans, of course. Borrow those first, since they usually have a lower interest rate AND eligible for Income-Driven Repayment programs.

Is There a Difference on how much you CAN borrow and how much you NEED to borrows?

o Take out only how much you NEED. Don’t take out as much as they will give you and just place it in a checking account making 0.01% while paying 6.8% on it. If you take out more than you need, this probably means you have a spending problem. Or, you are trying to support other people despite not being in a position to do such a thing. Tell those people you will help them out later in life when you are not broke. If you have a spouse and kids, you may need to consider your spouse working. This might mean you don’t play golf, go skiing after class or hang out with your friends as much because you are at home taking care of your kids and trying to study while your spouse is at work.

Dealing With the Guilt of Living on Debt

o This is important. I often tell PA students to minimize how much they borrow. Some take personal offense and start defending their latest expenditure. I bet most of them have a guilty conscience because they already know they are not managing money well (think about the patient who smokes and gets offensive when you utter the words, “have you considered cutting down”). There are many reasons PA students feel guilty about living on debt and they probably should not…Let me explain.

1. PA School is a good investment. The average PA makes about $115K and this number should climb with inflation going forward. The average PA graduates with around $125K, a number also likely to climb. That’s a debt to income ratio of about 1.

2. You will be able to pay back the debt by working hard and managing money well after you graduate. That means you will have to work hard AND manage money well after graduation. The good news is thousands of PAs and other professional graduate students have successfully done this before you. LIVE LIKE A STUDENT for a few years. It works!

3. You already know which specialty you see yourself in. There is a chance you pick a specialty that has a residency that will slow down your journey. Remember, live like a student (or resident) and you will be fine.

4. Don’t listen to people who say anyone can get through school without debt. Facebook post say it all the time! It is possible to sneak through undergraduate education without debt. No one is paying for PA school with tuition of $40-80K per year. Unless you score some amazing, but rare scholarships, have a spouse making $150k per year or have wealthy/generous parents, you are just going to have to borrow some money.

At last, you will need to realize you are on a unique trajectory. You are different than the average American, even professional student. You have an amazing track towards high income earning potential. It requires large amounts of debt upfront and a life delay but there is a light at the end of the tunnel. It is very normal to have a negative debt worth at 25, 30 or even 35 but not 40 or beyond. Accept the path laid upon you. It is reliable to increase your wealth. Change your life and your family tree! Manage your money well, stop feeling guilty about living on debt and PLEASE stop calling your student loans a “refund”!

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