If you receive some form of financial aid--such as grants or loans--your decision to drop out of college will affect your financial aid award for future semesters in which you plan to enroll in school and potentially trigger repayment responsibilities. If you are attending college--yet don't have a job or are underemployed--consider whether you can begin repayment of your financial aid if you drop of of school tomorrow. While options like forbearance are sometimes available for putting off repayment, you can only put off repayment for so long.
The role of financial aid is to provide everyone, despite their ability to pay up front, with the opportunity to get a higher education. Scholarships and grants do not generally have to be repaid, unless you drop out, while loans must be repaid. Financial aid may be need-based or merit-based, and it can come from the federal government, state government, institution, foundations or other private sources.
Dropping out of college means that repayment of your student loans is accelerated. Often, repayment must start six months after students drop out. 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.
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If you are owed a refund, you may not see any money. That's because the federal and state agencies that lent or gave you money must get repaid first. Typically, if your refund satisfies those debts for the semester in full, you then receive the rest. You can typically expect to receive a check from your institution within a few weeks of dropping out.
Take careful stock to determine whether dropping out is an absolute necessity. If you decide to re-enroll later, your decision to drop out could hurt your ability to secure future financial aid, according to the Student Loans for College Website. Plus, if you cannot afford to begin repaying your financial aid, dropping out can result in a default, which can affect your credit report and score negatively, preventing you from getting new credit in the future, such as private student loans.