What happens if you dropout of college with financial aid

If you have to leave school and cannot afford your student loan payments, there are a few ways to make your debt more manageable:. If you have federal student loans, you can apply for an income-driven repayment IDR plan.

Once enrolled, your monthly payments will be based on a portion of your discretionary income, and your repayment term is extended. Depending on your income, you could qualify for a much smaller monthly payment. You can apply for an IDR plan online. Another option for federal loan borrowers is to request a forbearance or deferment. If eligible, you can postpone your payments for several months without entering default, giving you more time to get on your feet.

Contact your loan servicer to see if forbearance or deferment is an option for you. However, some lenders offer their own forbearance programs or alternative payment plans for borrowers who are experiencing financial hardships. Student loan refinancing is a process where you combine all of your existing student loans into one new loan from a private lender.

When you refinance, you can change your loan term, with some lenders offering terms as long as 25 years. Kat Tretina is a freelance writer based in Orlando, FL. She specializes in helping people finance their education and manage debt. Jordan Tarver is the assistant editor for loans at Forbes Advisor. Before joining Forbes Advisor, Jordan was an editor and writer for multiple finance sites, focusing on loans, credit cards and bank accounts.

His goal is to create actionable content that enables people to make sound personal financial decisions. When he is not working on personal finance content, Jordan is a self-help author and world traveler who helps people experience the world and discover themselves. Select Region. United States. United Kingdom. Kat Tretina, Jordan Tarver. Contributor, Editor. Editorial Note: Forbes Advisor may earn a commission on sales made from partner links on this page, but that doesn't affect our editors' opinions or evaluations.

When you have to start making payments is dependent on the type of loans you have. Federal Student Loans Once you drop below half-time status or withdraw from school completely, the institution notifies your lender about the change in your enrollment status, and your federal student loans enter repayment.

Compare Rates Now. This guide will answer the question of what happens to your financial aid if you withdraw from all your classes or drop out of school. Federal, state, and institutional aid is given to students with the understanding that they meet specific criteria. Aside from financial need or exceptional merit in a certain area, most students are required to remain at least half-time students.

If you fail to meet these requirements, different aid programs require you to take different steps. To receive any financial aid, especially federal financial aid, you must meet basic eligibility requirements. You must:. Many students fail to understand these eligibility criteria, especially those involving satisfactory academic progress SAP and how their enrollment status works into that.

This means they do not understand what happens to their financial aid if they withdraw or drop out, including if they withdraw without notice. Each school has variations on policies regarding withdrawal from some of your courses or leaving school entirely.

Here are some examples:. Schools understand that students leave postsecondary education for numerous reasons. If you simply disappear, you will be subject to serious penalties, including exclusion from other aid programs and harm to your credit score.

If you remain in contact with those managing your education costs, they will work with you so you can repay your loans, grants, and scholarships. Unsubsidized loans do not have a grace period, but you can work with your loan servicer on deferment or forbearance.

Halting payments on the principal amount, but paying down some of the accruing interest, helps you manage your personal finances alongside your student loan. You may not be able to get your financial aid back if you withdraw or quit school.

However, there are some instances when you can get your financial aid back after withdrawing or quitting. Too often, students quit school to take care of personal matters, including dependants, serious illness, or financial struggles. Schools are understanding of these problems and will work with you to formalize leaving.

However, loans aren't your only worry. Drop outs must repay part of their Pell Grants, which are made by the federal government, as well. The percentage of Pell Grants that students must pay back is determined using a formula set by the Department of Education. Students may have to repay up to half of their Pell Grant awards depending on when during a semester they drop out, according to FastWeb, a student aid information Website.

Additionally, institutional or private scholarships may have stipulations requiring repayment if you drop out of college during a semester in which you were using the aid to pay for classes. By repaying financial aid, you're essentially providing a refund to the organizations that made an investment in your education by repaying the aid.

However, you too may be entitled to a full or partial refund of the money paid to the institution for tuition and fees for the semester in which you dropped out.

This will vary by institution, so check your institution's policy on refunds from withdrawals. If you plan on dropping out, do so as early in a semester as possible, to ensure you get the biggest possible refund. If classes have yet to begin, you may be entitled to a full refund for the semester.

If you are owed a refund, you may not see any money.