Can You Get Financial Aid for College If You Owe Another College?

Without financial aid, you may not be able to afford college.
Image Credit: ABRAHAM GONZALEZ FERNANDEZ/iStock/GettyImages

Whether or not you can get financial aid to go to college depends on the status of your past financial aid. If you owe a college money, that in itself isn't going to stop you from enrolling in another college. But if you owe on loans or grants as a result of your attendance at your old school, that could prevent you from receiving financial aid. In such cases, you need to take action to get the defaulted loans in good status or pay back the grants owed to the government.

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Consider also​: 5 Useful Apps for Paying off Student Loans

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Types of Financial Aid

The U.S. Department of Education offers a variety of federally funded loans and grants to college students. You will submit a FAFSA application with all your important information so that the government and your school can determine the aid types and amounts for which you qualify.

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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. Other types of federal grants include the Teacher Education Assistance for College and Higher Education program and Federal Supplemental Educational Opportunity Grants.

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Stafford loans are federally backed loans that originate from a lender. Therefore, they have to be repaid whether you complete your courses or not, although student loan forgiveness pathways do exist. There are also PLUS loans from the government for both borrowers and their parents.

Consider also​: Definition of Outstanding Loans

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Owing a College Money

If you applied for financial aid at your old college, your financial aid determined from your FAFSA application 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.

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If you cannot afford to pay the difference, the college will most likely withhold transcripts, and this can make it harder to transfer elsewhere. However, some states have outlawed this practice. Do keep in mind, however, that simply owing money directly to a college won't limit your ability to apply for financial aid at a new school.

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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.

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Consider also​: Can Anyone Put a Lien on My Tax Refund?

Solutions for Federal Aid Repayment

If you are in default on your student loans, correcting the problem will enable you to apply for financial aid again.

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You should contact your student loan lender to find out your available options. For example, you may be able to consolidate your loans, or you may be eligible for a deferment or forbearance. To make it easier to pay your student loans in the future, you might sign up for an income-based repayment plan that can ultimately provide you with student loan forgiveness after a number of years such as ​10 or 25​.

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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.

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