If you're talking about Federal loans, then that money is usually disbursed through the university. Payments for tuition and other expenses are withdrawn, then any leftover funds are refunded to the student at the end of the term. The refund is usually in the form of a check made payable to the student, so I don't understand how her foster family was able to keep any of the funds.
Your wife will be responsible for the costs of the term she was enrolled, even though she didn't complete it. You might want to contact the university about the other funds.

