Types of Financial Aid
The U.S. Department of Education offers a variety of federally funded loans and grants to college students. They include the Pell grant, an award that is based on your school costs and your ability to pay. Pell grants do not have to be paid back as long as you stay in school. Stafford loans are federally backed loans that originate from a lender. They have to be repaid whether you complete your courses or not.
Owing a College Money
If you applied for financial aid at your old college, your financial aid would have been used to pay your tuition and fees. If there isn't enough money to cover your tuition, you'll receive a bill from the school. This is a contract between you and the school; if you cannot afford to pay the difference, the college will most likely withhold transcripts. However, owing money directly to a college won't limit your ability to apply for financial aid at a new school.
Owing the Government Money
The rules on applying for financial aid change if you owe money to the federal government. For example, if you drop out of school and have to pay back your Pell grant, you can't get financial aid until you have repaid the grant. Likewise, if you owe on your student loans and are in default, that will also prevent you from applying for federally funded financial aid. You may be able to get private financial aid however.
If you are in default on your student loans, correcting the problem will enable you to apply for financial aid again. Contact your student loan lender to find out your available options; you may be able to consolidate your loans or you may be eligible for a deferment or forbearance. If you owe money on a Pell grant, the only way to re-apply for financial aid is to pay the Pell grant back. Your repayment options could involve allocating a portion of your tax refund to pay the debt.