College doesn’t stop for anyone, even if you have an emergency. But what about your financial aid?
If you need to take time off school, here’s what could happen to your funds.
How taking time off school affects your financial aid
While enrolled in school, you’ll complete the FAFSA each year to access funding. The FAFSA helps your school decide how much financial aid — from scholarships and grants to loans — you’ll get for the year.
Circumstances can change your college trajectory, though. You might need to take time off school for a few reasons, such as to manage a family emergency or stress or so you can work more to pay your bills.
Whether you’re taking off a semester or an entire year, you don’t need to pay for classes you didn’t sign up for, said Jay Murray, president of Solutions for Tuition, a college cost assistance company.
“If you weren’t enrolled in school, then you didn’t borrow any money for that year,” he said. “You will, however, be required to begin making payments on your existing federal student loans six months after leaving school, regardless of whether you graduated, withdrew, or dropped out.”
What happens to my student loans?
While some federal student loans are considered part of your financial aid package, not all loans are handled the same way when you take time off.
If you take a semester off, it shouldn’t make much of a difference for your federal loans. Most federal loans have a six-month grace period. When you return to school at least half time after taking a semester off, the grace period on your loans will reset, provided you didn’t exceed it.
Some private student loans also have a grace period, but it depends on your terms, lender, and enrollment situation. Talk to your school or lender about your options if you have private student loans.
“You only pay back what you borrow,” said Joseph Inskeep, a financial adviser for Advanced Wealth Strategies Group, a Texas-based financial planning firm. “If you didn’t borrow any money during the year you were off or were supposed to be enrolled, then you will not have accrued any extra loans for that semester, just interest accrual.”
What happens to my scholarships and grants?
Scholarships and grants are a bit different than loans. Murray said taking time off school hurts your chances of keeping scholarships when you return.
“Students who were awarded a merit scholarship are at [the] greatest risk,” he said. “When students take time off school, they violate the satisfactory academic progress requirement and may forfeit their scholarship for all remaining years, even when returning to school.”
Many private scholarships and grants don’t take a one-size-fits-all approach. Some do require you to maintain a minimum number of course hours each semester, and you could lose aid if you drop below full- or part-time enrollment.
If you’ve received scholarships and grants, talk to your issuers about what will happen to your awards if you take time away from school. You should also inquire about grace periods.
Since everyone’s situation is unique, talk to your school’s financial aid office or college adviser about what will happen to your grants and scholarships once you return to class. Your college might have different standards for receiving aid based on your enrollment.
Where to look for repayment help
If you take longer than a semester off school or have loans that require payments while you’re still a student, you might need help staying current on your debt. Here’s what to do, depending on which types of loans you have.
Federal student loans
Your enrollment status could affect your repayment. If you have federal student loans, you could qualify for deferment or forbearance. Deferring your loans pauses your payments for up to three years, while forbearance pauses your payments for up to 12 months.
Depending on your loan type and lender, you could defer student loans interest-free during that time. If you’re currently enrolled or you’re planning to return to school, deferment could help you avoid making payments until you graduate. If you have unsubsidized loans, however, interest will continue to accrue during deferment.
Private student loans
With private lenders, you aren’t entitled to any sort of financial relief. Some private student loans do offer deferment and forbearance options, depending on your loan type, terms, and the lender. But it’s not common.
Federal student loans are more flexible when it comes to repayment terms. Private student loans are stricter. There’s no universal standard for private student loan forgiveness since each lender operates on its own terms.
If you’re having trouble with your private student loans while you’re taking time away from school, contact your lender about your struggles. It might seem tempting to simply not pay your loan back if you can’t afford it, but dodging payments will hurt your credit score.
Know your options if you have to take a break from school
Regardless of why you need to take time away from school, remember that everyone’s financial situation is unique. If you need to be away from classes for a semester or more, talk to your school’s financial aid office about your student aid to understand what you’re responsible for while you’re away.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
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2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
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