Here at StudentLoanNetwork.com, we get a lot of questions from students and parents. One of the more common ones involves withdrawal; If a student withdraws from school, what happens to financial aid? The short answer is, it depends.
What does it mean to withdraw?
Let’s start at the beginning, shall we? A withdrawal from school is when a student ceases to be enrolled before the closing of a period of enrollment. The actual date depends on your school and how semesters are arranged. Dropping a class or two does not count as a school withdrawal, and the following standards do not apply in that situation. Note: You always want to officially withdraw, as an unofficial withdrawal may lead to failing grades and a poor transcript.
What happens to federal aid?
In the case of a withdrawal, your school is required to return a portion of your Title IV aid to the Department of Education. This includes only the federal aid you received, private loans are treated differently. The exact amount returned depends on when you withdraw from classes. If you withdraw after you are 60% through the semester, all of your financial aid is considered “earned” and will not be returned to the government. However, a withdrawal before this date requires some calculations by your financial aid office to determine how much of the funds were considered used.
Will you get to keep any money?
Possibly. According to the Department of Education
“If the amount disbursed to the student is less than the amount the student earned, and for which the student is otherwise eligible, he or she is eligible to receive a Post-withdrawal disbursement of the earned aid that was not received.”
If you are eligible to receive a post-withdrawal disbursement (meaning you get money back from your financial aid award) the school has 45 days from the date of withdrawal to disburse Title IV grant funds to you, and 180 days for loan funds.
There are different refund policies for institutional fees, so check with your financial aid office for more information on school-specific refund policies.
What happens to private loan funds?
There are no federal regulations regarding the need to return private loan funds, so check with your lender to find out more. In most cases, unused private loans will be returned to you.
When will you need to start repayment?
In the case of a withdrawal, a student must begin repaying any unreturned loans when the grace period ends. For private loans, it’s possible a withdrawal would mean immediate repayment, so contact your lender for more information.
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