How Transferring Schools Can Affect Student Loans

If you’re planning on switching schools, there are likely a number of reasons behind the decision. Some people transfer after realizing a different academic program will better fit their long-term career goals, while others simply want to be closer to their families.

No matter their reason for transferring, all of these students should think about their student loans. Unlike credits, which may or may not follow a student to a new institution, student loans never transfer between schools. As a result, prospective transfer students need to be aware of a number of things to ensure they can fund their education at a new school and take care of what they’ve already borrowed.

Resubmit Your FAFSA

When you transfer, you have to resubmit your Free Application for Federal Student Aid to your new school. Fortunately, resubmit does not necessarily equal redo.

Each academic year has its own FAFSA. If you transfer midyear, the FAFSA you completed for that year is still good. Simply list your intended transfer school or schools in the form and resubmit it at FAFSA.ed.gov.

[Learn about five keys to a successful January college transfer.]

Because the other information on your FAFSA remains the same, your eligibility for financial aid will be the same as well. That means there shouldn’t be any surprises when it comes to your expected family contribution.

In addition, the government regulates the amount of federal student aid a borrower can receive. That means you can’t get more than the annual maximum in Pell Grants – $5,730 –  or subsidized Stafford loans – $3,500, if it’s your first year in school – no matter the school or schools you attend.

Despite these rules to standardize processes, transfer students still have to resubmit their FAFSAs. That’s because these borrowers won’t necessarily receive the same exact award at different schools. You have to go through a school’s financial aid process, including receiving a new student aid report, so they can calculate that themselves.

Your Financial Award May Be Less

Odds are, your awards won’t differ greatly from school to school, particularly when it comes to your federal student aid. As mentioned above, your expected family contribution is the same no matter which school you attend. Still, your overall award may differ and your new one could potentially be less than you thought. There could be a few reasons for this.

[Read about eight things college transfer students need to know.]

First, your new school may award you less institutional aid. This could be due to your financial situation or theirs. Some schools simply have less money to give out. Much campus-based aid, including Perkins loans, is limited and disbursed on a first-come, first-served basis.

So, it’s possible that funds that were once available to you are no longer an option. Unfortunately, like federal loans, any campus-based aid you previously received won’t transfer with you either.

In addition, if you transfer midyear, you may qualify for less financial aid than you did as a first-time or returning student. This will depend on how much aid you earned at your previous school. In general, you don’t fully earn financial aid until you’re 60 percent through a semester.

Leave before then, and your school returns the unearned aid, loans first, to the federal government. This could affect your borrowing maximums at your new school.

Finally, your school’s cost of attendance can affect your award. Transfer to a less expensive school, and your aid may shrink as well. If your federal aid amounts shift greatly, it will likely be because of a big cost differential between your old and your new school. Then again, going to a cheaper school and having fewer loans to repay isn’t necessarily a bad thing.

[Check out 10 tools to help estimate the cost of college.]

Don’t Forget About Any Existing Loans

Your federal loans may not transfer with you, but that doesn’t mean they disappear. When you leave your old school, your loans from there will begin their grace period. That means you may have to make payments on them in as little as six months.

If you plan to immediately re-enroll in a new school at least half time, you can file for an in-school deferment to pause these payments. This will allow you hold off on making them until you graduate from your new school or drop below half-time enrollment again.

In addition, remember to check out your new school’s satisfactory academic progress policy to find out how they measure transfer credits. If you fall below SAP, you can become ineligible for aid.

You should also be sure to understand how transferring affects your eligibility for subsidized Stafford loan interest payments. If you transfer from a four-year program to a two-year program, this can greatly affect how much aid you’re eligible for as well.

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