What happens to my financial aid if I withdraw from school?
When you withdraw from school, it can affect your financial aid beyond just having to pay back your student loans. Depending on the type of aid you’ve received, you may be responsible for returning money from grants or scholarships, and there can be other repercussions, too.
In this article, we’re going to explore what happens to your financial aid should you decide to withdraw from school.
What happens to your financial aid if you withdraw from school?
If you received any federal student aid (like Pell Grants, Supplemental Educational Opportunity Grants, Stafford Loans, PLUS Loans, or Federal Perkins Loans), your school might have to refund all or part of that money if you decide to leave school early to the Federal government. The amount of money your school returns will depend on your attendance that semester. For example, if you attended only half the semester, your school may need to refund the entire second half of the semester.
According to the Federal Student Aid Handbook, when a course is below 60 percent completion, the costs of that course are prorated. That means when you stay for more than 60 percent of a semester’s duration, you earn 100% of federal funds. However, if you leave with less than 60 percent of the semester complete, the remaining federal funds for that semester must be returned.
How withdrawal impacts other financial aid awards
Your withdrawal from school can affect other types of financial aid you’ve received, like state loans, private loans, school awards, and scholarships.
If you withdraw, your school may have to return the balance of your financial aid to the source of the funds or cancel those funds. You may also lose eligibility for some or all of these funds in the future. For example, the state where you went to school might take away a semester of eligibility for some forms of state aid if you didn’t finish your last semester.
It’s important to remember that even if you withdraw from school, your loans stay with you. Withdrawing from school triggers the start of the loan repayment grace period, if applicable, to your particular federal loan.
That grace period is the six-month period the federal government provides students to postpone the immediate repayment of federal student loans. For example, a student with Direct Loans who withdraws from school has a six-month grace period from when they withdraw to begin making loan payments. If you withdraw and then re-enroll, however, the grace period is reinstated and will be re-triggered if you withdraw again or graduate.
What should you do if you need to withdraw from school
Contact your school counselor and financial aid office. They’ll record the withdrawal date and use it to calculate the total amount of financial aid used for your last semester. That could trigger you needing to repay some of the funds.
Before deciding to withdraw from school, ensure you understand the financial impact of your decision. If you need help, reach out to the financial aid office at your school to get clarity on what the impact will be.
Another thing to consider is talking to your professors before you withdraw from your classes to see if there’s anything you can do to complete your classes. It won’t hurt to explore all of the options.
If you face financial consequences because you withdraw, make sure not to ignore them. For instance, if you need to repay funds or if your student loans now need to be paid because you withdraw, set up an action plan to make payments or your credit score could be negatively impacted.
Withdrawing from school isn’t a decision to take lightly because it can have significant financial consequences. Explore every option you can and make sure you understand the decision fully before making this choice.