The Impact of Dropping Out on Financial Aid

Students and Parents May Be Responsible for Repayment

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The decision to attend college is not an easy one to make, and neither is the one to stop attending college. Despite all their best efforts, or due to certain disciplinary problems, a portion of the college body does drop out each year. This may have severe repercussions because financial aid was granted based on the assumption that the student was going to complete the academic year. The student may be able to obtain a small refund from the institution, but this may not be enough to repay all of the outstanding obligations.

If your child is thinking about dropping out, here are some things you need to know about repaying financial aid:

  • Financial aid: Students who drop out of college may be required to pay back a portion of the federal student aid they received, such as the Pell Grant. The amount due may be as high as 50% of a percentage of the aid that the Department of Education determines was not used for classes. State agencies that provided financial support may also require some type of repayment.
  • Student loans: Unfortunately student loans are not discharged simply because the student is no longer attending college. Any portion of parent and student loans that are not retained by the college for academic services until the point of departure will become due, so start researching repayment options quickly. You will have to educate yourself about this process as exit counseling is usually provided upon graduation. Try to pay more than the minimum amount due, in order to draw down the balance faster. Many former students are surprised at how long it can take to pay back three or four semesters of college loans with a job based on a high school diploma.
  • Scholarships and grants: Your student may have received a number of scholarships and grants as part of the financial aid package. You will need to check the requirements on these very carefully as many do require satisfactory completion of a degree program or sufficient evidence of academic progress. If the student drops out, you may be required to repay part or all of the grant or scholarship.
    • ROTC: It is best to check with the military branch to determine if there is any financial obligation for students who drop out of ROTC programs. Generally, there is no obligation if the students quit before the sophomore year. But if students quit after the start of the sophomore year, they either have to pay back tuition expended to-date, or go on active military service in enlisted status immediately if they drop out of college completely, or upon graduation if they remain in college. In the case of a medical condition that precludes a student from being commissioned as an officer, the obligation might be erased.

    Make sure your child is good college material and the school is a good fit before taking on any form of financial aid. If your child has already started college and is now considering dropping out, try to have a long talk together and explain the impact. Not only will it be harder to find a high-paying job, any money earned initially might have to go towards repaying financial aid. Ask your child if tutoring, cutting back on classes, switching majors or transferring to another college might help, or find out if it is possible to stick it out until the end of the semester.

    This can be a life-altering decision, so don’t take it lightly.