Sep 22, 2017

Dropping Out and Repaying Financial Aid


RepayingAid

Students decide to drop out of college for a variety of reasons. Whether it’s because of a family emergency, work obligations, or general academic stress, students decide to leave college before receiving their degree every day. While leaving college early for any reason is always an option, you may not realize that you will ultimately be required to pay portions of your financial aid back to the federal requirement. If you are currently on financial aid, you must read this article before dropping out of college!

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Students withdrawing from courses may be required to pay back funding received from Title IV programs, including the Federal Pell Grant and Federal Supplemental Educational Opportunity Grant (FSEOG). You may also be required to repay state aid, as well as student and parent loans. Your school’s financial aid office will notify you in writing, letting you know the exact amounts you must repay.

Pay Back Formula

Due to new regulations, the federal government now requires students to actually earn their financial aid. What does this mean? A refund-calculation formula determines the percentage of financial aid that a student has earned, along with the percentage they may eventually owe back. The formula used by the Department of Education determining how much financial aid a college dropout now owes back is as follows: students are required to pay back 50 percent of whatever portion of financial aid not used to cover college tuition costs. The exact size of this portion depends on when during the semester the student officially withdraws.




Sample Financial Aid Scenario

Do you find all of this to be very confusing? Follow the example below to get a better idea of what we’re talking about.

Student A is awarded a $2,500 Federal Pell Grant for the fall semester and uses $1,250 to cover tuition costs. One-forth of the way through the term, the student decides to withdraw. Under guidelines established by the U.S. Department of Education, Student A only earned 25 percent of this grant before dropping out, so the unearned portion of the grant “75% or $937.50” used on tuition costs must be returned. However, Student A is personally responsible for paying back only 50 percent ($468.75) of his unearned aid not used toward tuition. Since Student A dropped out one-fourth of the way through the semester, he or she earned only $312.50 of the original $1,250, plus 50 percent of the remaining amount of $937.50 ($468.75). The remaining 50% (also $468.75) is what the student is now required to pay back.

Dropping out and Repaying Financial Aid

If you drop out of college, you will also be required to repay any student loans you received at an accelerated rate, typically six months after withdrawal. You should also be aware of the fact that some institutional and private scholarship policies require you to repay your scholarship award if you drop out of school during a term in which you received funding.




A Note of Caution Before You Drop Out

If you are currently attending college and are considering dropping out, first stop and think about whether you will actually be able to pay back your financial aid. If you cannot afford to pay back, it might result in a default. If you default, it can ultimately wreak havoc on your credit report and score, perhaps seriously hindering you from receiving additional credit in the future. Do whatever you can to stay in school if possible, as earning a college degree can only help you. If dropping out is unavoidable, try to withdraw as early in the semester as possible, so as to receive the biggest refund possible. If you regret having enrolled in college before classes even begin, you may be able to receive a full refund for the semester. Remember: even if you are owed a refund, you still may not receive any money, as federal and state agencies that provided funding must be repayed first.

 

Comments

  1. It depends on your particular situation. The best advice is to speak with your college about the implications. In most cases, colleges are always open to helping you find a suitable option.

    • What if you finish this semester and decide not to attend next semester do we have to pay back even though you sign up for FAFSA, but didn’t registrar for classes? Also what if you didn’t pass all your class do you have to pay back?

    • Hi Andy,

      It’s unlikely that you will be able to transfer your credits from a university to a community college. But it all depends on your personal situation e.g. what course you are taking, what institution you are attending and where you want to transfer. The best option is to speak with your Financial Aid office first, so you know what the financial implications will be. You may also want to contact your college career adviser/counselor.

      College Mouse Team

  2. What if its the end of the semester already and I would need to drop out? How much would I have to pay back?

  3. Hi Lisa,

    Thanks for your question. Generally, it is advisable that you try to stay in school and complete your course. Whether or not you have to pay back, and how much, depends on the type of financial aid your received. For student loans and scholarships, you will definitely still be required to pay back. And in the case of a loan, your repayment may even be accelerated as a result. Our advice is that you speak to your financial aid office to get the best possible advice, as your situation will depend on your unique circumstances.

    College Mouse Team

  4. Hi, I recieved a federal pell grant of $1,900 yet I dropped out three months into school. I need to know the what I will have to pay back. By the way, I started school in my hometown and applied for federal aid.

    • Hi Latasha,

      Thanks for your inquiry. In general, you don’t have to pay back the Federal Pell grant, but that only applies if you attend and pass all of your classes for that semester. If you simply drop out, you may deemed to have not met your eligibility criteria for the grant in the first place, in which case you lose the grant. In such a situation, you may be directly liable for the tuition. The best course of action is to speak directly with your school or with a qualified financial aid adviser. They will provide you with better advice, based on your individual situation.

      College Mouse Team

      • If I stay the full school year (fall and spring semester) and pass my classes, afterward will I be able to withdraw from my school without having to pay back financial aid ? And is it safe to assume I should not re-apply next year?

  5. Hello, I finished my first year of college with two pell grants and two loans and I passed and attended all of my classes. This year I was awarded 1 pell grant and two loans [not yet disbursed] and I am thinking of dropping out momentarily so I can work to make more money. I’m wondering if I will have to pay any money back to the grants and loans of the year before as well as the grant and loans for this new year.

    I figured if I could actually manage it and be able to work a lot, I could save up a lot to continue school, but if I end up having to dish out a lot of money to pay back for my major and the money I’ve taken, then dropping out doesn’t make much sense.

    Thank you.

  6. What if I got my associates degree and transferred to another college for a bachelor’s and decide to stop attending to colleg. Do I have to pay even though I didn’t register for any classes?

  7. Hello I have been going to community college for 3 years now not full time and have been receiving financial aid if i decide not to finish my A.A degree will I be required to pay the whole amount of financial aid I was given? Thanks.

  8. Hello I am currently attending a university, and was thinking of dropping out. If i lose the pell grant after the fall semester and dont register for the spring because of it, will i still be rsponsible for paying the pell grant back since i am no longer eligible or meet the SAP? What about the university scholarship?

  9. I am considering of going from a community college to a college of health care profession where I can graduate within a year in dental assistant. Will I have to pay back the the financial aid( I received grants) I received in this instance?

  10. My tutution is $15,604, I got a pell grant for $5775, I been to school for 2 months, I gonna to dropped out because I need a job, I wasted gas to school, I’m behind on bills and I just can’t finished, how much will I be responsible to pay for?

  11. Hello,
    I am currently enrolled in classes and am half way through the semester I have no problem paying back the financial aid is there a payment plan though or is it due all in one shot?

  12. Hello,
    I am thinking of dropping out of college after I finish this semester. Since I recieved scholarships and grants, but I am not completeing the full year, would I still be able to get the full amount applied to the term I did complete, and get a refund for out of pocket money already dispursed?
    I am also trying to decide if i should just attend a community college and earn my associate next year. If I drop out the fall semester, work spring semester, and attend the community in the fall, would I still be able to keep off the loan payments until I finish my associate degree?

  13. Hi. I received $2850 federal pell grant for my community college fall semester(2015) but two days after the semester started ,I dropped out.Do I owe any money to my college or fafsa?And if so how do I determine what I owe?

  14. I signed up for a 9 month course. I have completed only 3 weeks and I am unable to continue. Is there a way to know what percentage I would have to pay back at this point?

  15. My son just finished his first semester of collage at a university, he did not do well with his grades and he is thinking about going to another university for the spring semester.We have a federal direct unsubsidized loan and a federal direct parent plus loan. Can we transfer this loans to the new school.
    Thank you

  16. I just started my second semester of my freshmen year and really considering dropping out. Would I have to pay for last semester and this one?

  17. So what if I got a scholarship from my college that pays my tuition for Fall, Winter, and Spring term as long as I take 12 credits and maintain a minimum 3.25 GPA. I also received 2,000ish in grants and used that for books and put the rest in my savings account. If I were to drop out half way through my 2nd of 3 terms, would I have to pay anything back? How would it be calculated? It’s confusing because I have a scholarship that paid for my tuition and so I didn’t use my grant to pay for my tuition.

  18. What if I passed all of my classes, and earned a certificate of achievement would I have to pay back financial aid since I only earned a certificate and not a degree?

  19. What about dropping out of college after the whole school year is over to go to a different school, say for example, Tricoci University, a beauty Culture school

  20. how I contact someone to payoff a grant I received for a full year of school and only completed the 1st semester. I just want to set up some type of payment plan to pay of my debt.

  21. Im wanting to drop all of my class and go to a cosmetology school. I have student loans now but if i drop will I be able to get another stident loan for my other school?

  22. I have a question I took my first semester of college August 2015 passed my classes took 3 classes then I am taking 3 more this semester January 2016 I don’t want to go to school I but ii want to finish andnot go next semester. I was awarded $1,600 from fafsa money am I going to pay all or some money back

  23. I was wondering if someone would be able to answer my question. I graduated high school in 2007. Immediately after high school i attended a nearby community college and received financial aid. Im not exactly sure which programs i had received from but i think i still have the paperwork somewhere if i needed it. Although i ended up having some personal issues and ended up not being able to go back. For instance i was going everyday for a few months had excellent grades and then one day i just disappeared and never went back never dropped out and never called the school. It has been almost 10 years and my parents still live at the same house with the address that i used at the school and I’ve never received anything saying i owe or that i have to repay. So how do i find out if i owe or need to repay. I have been researching online and cant find any information on this subject except you may have too. I have had multiple jobs since then so if i owed anything wouldn’t they have garnished my wages? I have been wanting to go back to school for quite sometime now but i cant afford it without financial aid, so if i were to apply after 10 years would i be denied? Or would they immediately start going after me to repay. Im not exactly sure where to go or how to find out where i go from here.

  24. I dropp my college and now I’m paying but I want to go back in other college because I don’t feel comfortable and the college that I was I can i do help me 🙂

  25. I am curious if you might be able to answer some questions that have been bothering me. My husband went to Full Sail, finished his first semester, started the second semester and was only three weeks into his second semester when he decided to drop out. I had initially advised him to ask about policies concerning dropout but we were not able to follow through. He dropped out in November and in January we received a notice stating that he owed nearly 6k for the semester. The paperwork they sent us stated that they were even able to keep a portion of the finanicial aid and a small portion was returned. When we inquired as to why he would owe so much they stated that he’d only completed 29% but what was more we supposedly signed something that stated that if you attended up to the third week of school that you’d be responsible for the full tuition amount for the semester. This seems really weird to me as he left so early on. They did not provide us with a copy nor name for this document nor do I recall reading this (I try to thoroughly read things at least once). Since then (january) we have not been able to pay them anything towards it and they have only sent one notice. Am I wrong in not trusting this?

    • Just to jump in on this if this is still active. So if I drop out, what’s the time-frame/grace period before they ask me to start paying back my loan? What about pell grant? How soon do they start with repayment on that and is it all at once or a monthly payment type thing?

  26. I was in my last semester of school and owed money for hours I missed in passed do not have the 500 just to give so I had to drop out now if I try and reapply for 3rd semester again will my hours transfer over even if I get my own loan not financial aid cuz they will not go for a second chance even tho there was no way of me paying it even with job wile in school???

  27. I was enrolled in my first semester and my son contracted a virus that led us to be quarantined in his hospital room for two weeks. I spoke with my professors via email that all recommended I withdraw from my vlasses, full time. I’m now looking at going back to school for a technical degree and don’t know if I will qualify for financial aid.

  28. I was awarded a Federal Pell grant of $5,815.00. I used about $520 during the summer session and now that it’s time for the fall semester I wish to drop out. How much would I owe? Also would I be paying it back or would my mother? I was 17 at the time and used her taxes, now I’m 18. Please help ASAP.

  29. Hi. I am currently taking my second semester of classes at college and have a family emergency and dont really think i can continue. I know i will have to pay back my financial aid but my question is will i have to pay it back in one big sum or will it be smaller payments?

  30. I’m on a scholarship and I want to drop out for good. Would I have to repay the scholarship money? Since I’m already in the middle of the semester.

  31. Is there ANY help out there to help you repay these fees?!?!? I’m desperate to get my transcripts from my previous school so i can get into the only PT Nursing school in my area

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