What happens to financial aid if you withdraw from school? | 09.29.11

Posted in Financial Aid By Student Loan Network Staff

girl with questionsHere 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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50 Responses to “What happens to financial aid if you withdraw from school?”

  1. Jasmine says on February 26, 2013 at 1:01 am:

    I’m attending a CUNY school right now, a Business Management major, and I’m moving to Florida in June and attending another college with a different major. I took out a loan for the Spring 2013 semester & didn’t get my first disbursement yet. I asked the Financial Aid office and I was told that it will not affect anything if I withdraw my classes or cancel my loan. I want to know if that is true since it hasn’t been 60% of the semester yet, and when I file for financial aid or a loan in the other college will there be a problem since I withdrew these 4 classes?

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    • Melanie says on April 16, 2013 at 3:07 am:

      I need to know the same thing. I am not supposed to start school until June 3rd. I want to know if I can apply to another school and be eligible for student loans. My loans have not been disbursed at the school I am enrolled at now. I found another school that has what I am looking for.

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  2. Aly says on February 10, 2013 at 2:51 am:

    I was attending beauty collage and recently had a baby. I went on leave of absence at school on July 29th threw october.. before my leave of absence was up in September they told me it had already expired.. now my boyfriend was also attending the same collage and went on his leave 2 WEEKS before I did… And his did not expire till after mine was up.. so I had to get an extension from the Dr to be on loa longer. Upon returning my son had been very ill and I missed the first week of school when my loa had finally expired which had put me on probation at school… I had completed 49 hours for the month of October… Then I found my original leave of absence which had said I wasnt supposed to be back originally until October making my extension till November. I informed the school of there mistake and they took ALL MY HOURS I CloCKED FOR THE month of OCTOBER AWAY! Can they do that to me for they’re mistake??? Also after seeing how expensive it is to have a newborn I recently started working at a prison and my work hours are now conflicting with my school hours so I went to the school and asked if I can withdraw from beauty collage and enroll in a year when my sons a little older. When I asked the owner of the school very rudely told me “I’m not going to withdraw you, your not withdrawing! I’m going to drop you!” Can she do that?? And will it effect my loans and scholarships?

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  3. Tawny Nance says on December 13, 2012 at 2:15 pm:

    My daughter is in beauty school and wants to withdraw to become apprenticed..how do we start to find out where to start

    Reply To This Comment
    • Student Loan Guru says on December 26, 2012 at 4:53 pm:

      You should talk to the school’s financial aid office. They will be able to give you the best course of action. You can also call the Department of Education to find repayment or deferment options for any loans she may have.

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  4. Meg says on October 1, 2012 at 8:36 pm:

    I am in graduate school, thinking of withdrawing because I dont like the field. I am applying to a small medical program but I wont be withdrawn from the graduate program till November and the other program doesn’t accept people for more than 6 months after that. What can I do to keep my loans at bay, until I know if I got into the other program and will I have to pay as I go, because I will be withdrawn from an university for over 6 months?

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