If you mistakenly record a Financial Aid disbursement to a student, DON'T REFUND IT! Rather, Void the transaction associated with the mistaken disbursement.
Refunding aid says that the money was first paid out from the source, and then was later refunded either to the source or to the student. That money is still "in play", as it were. Furthermore, those mistaken amounts affect what is reported on the student's 1098-T.
Voiding, on the other hand, just says, "Oops. Forget I ever said that..." It removes any effects of the money ever having changed hands (while retaining the record of the transaction to preserve a full, transparent audit).