Transferring schools? 6 things to know about your student loans

Transferring schools? 6 things to know about your student loans

Transferring schools? 6 things to know about your student loans

With U.S. universities making academic adjustments due to the ongoing COVID-19 crisis, more college students are taking stock of the situation and are transferring to new schools that offer them a better collegiate experience.

“Transferring schools is exceedingly popular,” said Karen Aronian, a former college professor and owner of Aronian Education Design LLC, in New York City. “Approximately one-third of students will transfer schools, according to the National Student Clearinghouse's study.”

The reasons why students transfer schools depend on their individual needs — and the coronavirus pandemic is an increasingly popular reason.

“In general, students may change schools for everyday reasons, switching to a community college or going from a two-year college to a four-year college,” Aronian said.

“These days, many students are transferring due to COVID-19's impact.

They may be changing majors or pursuing their 'first choice' school they didn’t originally attend because they weren’t admitted for enrollment.”

“Also, some students transfer because their school is not a good fit socially or have buyer's remorse and seek a change to a school that better suits them,” she added.

If you're a transferring student and need private loans to supplement your federal loans, consider using a multi-lender site Credible to shop around. With Credible, you can compare rates and lenders to find the best deal within minutes.

Student loan checklist for transfer students

When college students do switch schools, the transfer can have a sizable domino effect on other factors, especially financial ones student loans. That’s exactly why getting a full grip on student loans should be a top priority when transferring schools, with these aspects in mind:

  1. You're responsible for repaying the loan
  2. How student loan disbursements work
  3. Alert your servicer to avoid immediate repayment
  4. Track student loans
  5. Understand the larger financial picture
  6. When to pay off the loan

1. You're responsible for repaying the student loan

You won’t have to repay your college loan right after a school transfer — but don’t expect it to disappear, either.

“I transferred colleges 10 years ago, and while I was able to defer the federal loan I took out, I was still responsible for paying it back, even though I did not finish my degree at that institution,” said Mark Perlman, founder of TheDealExperts, a credit card comparison platform. “While in school, you can continue to defer the loans, but when you complete your degree, you have to pay back all loans, including interest accrued.”


2. How student loan disbursements work

Whether you transfer colleges or not, loans are disbursed by academic term and to the college — not the student.

“That means that if you're a freshman at a college on semesters, you'd get $2,750 for the fall disbursed directly to the college,” said Ann Garcia, a financial planner at Independent Progressive Advisors, in Portland, Oregon.

“If you transfer, the remaining $2,750 can be disbursed at the new school.

Students who transfer simply need to log into their Federal Student Aid (FSA) loan account and add the new school so that their FAFSA data is transferred with their student loan eligibility.”

Still looking for a student loan? Use an online tool ​Credible to compare student loan variable interest rates and fixed interest rates without affecting their credit score.


3. Alert your servicer to avoid immediate repayment

Technically, when a student leaves the original school, the loans go into repayment status. “In that scenario, the student needs to contact their loan services provider and put the loan back into in-school deferment,” Garcia said. “This is especially important with subsidized loans since interest will begin to accrue if they go into repayment.”

You can learn more about loan servicers on an online marketplace Credible.


4. Track student loans

As far as tracking loan obligations, all federal student loans are accessible through the student's federal student aid account. “Just log in with your FSA identification number (it’s same as your FAFSA number) and review all your loans, including loan servicers,” Garcia said. “Note that private loans are serviced by the financial institution where the loan originated.”

5. Understand the larger financial aid picture

If a transferring student has financial gift aid of any form — merit or need (other than Pell Grants) — that student risks losing that aid when they transfer.

“Most schools offer far more scholarships to incoming freshmen than to transfer students,” Garcia said.

‘The best thing to do is to make sure you know the financial aid policies of the school you're going to and that you're not leaving thousands of dollars on the table.’

If your financial aid has been negatively impacted by a college transfer, look into a private student to cover immediate expenses. Check out Credible to get personalized rates from multiple lenders.

6. When to pay off the student loan

Perlman advises paying off older student loans if you can, while still in school.

“The loans aren't going anywhere, and you'll have to pay them eventually,” he said. “If you don’t address the student loan, it will be harder to keep track of which loan is from which school once you have completed your education.”


6 Things to Know About Student Loans Before You Start School

Transferring schools? 6 things to know about your student loans

The summer before your freshman year in college means choosing classes, checking out your future roommate’s Instagram and figuring out how you’re going to pay the bills.

Chances are you will need a loan: 2 3 students have debt when they leave school, according to 2017 graduate data from the Institute for College Access and Success. But consider a loan after you’ve accepted grants, scholarships and work-study. You can get these by submitting the Free Application for Federal Student Aid, or FAFSA.

Here are six things you need to know about getting your first student loan.

1. Opt for federal loans before private ones

There are two main loan types: federal and private. Get federal loans first by completing the FAFSA. They’re preferable because you don’t need credit history to qualify, and federal loans have income-driven repayment plans and forgiveness that private loans don’t.

You may be offered two types of federal loans: unsubsidized and subsidized. Subsidized loans — for students with financial need — don’t build interest while you’re in school. Unsubsidized loans do.

Take a private loan only after maxing out federal aid.

2. Borrow only what you need — and can reasonably repay

Undergraduate students can borrow up to $12,500 annually and $57,500 total in federal student loans. Private loan borrowers are limited to the cost of attendance — tuition, fees, room, board, books, transportation and personal expenses — minus financial aid that you don’t have to pay back.

Aim to borrow an amount that will keep your payments at around 10% of your projected after-tax monthly income. If you expect to earn an annual salary of $50,000, your student loan payments shouldn’t be over $279 a month, which means you can borrow about $26,000 at current rates.

Your school should provide instruction on accepting and rejecting financial aid in your award letter. If you’re not sure how to do it, contact your financial aid office.

“We're not scary people,” says Jill Rayner, director of financial aid at the University of North Georgia in Dahlonega, Georgia. “We really do want students and families to come in and talk with us so we can help strategize with them.”

3. You’ll pay fees and interest on the loan

You’re going to owe more than the amount you borrowed due to loan fees and interest.

Federal loans all require that you pay a loan fee, or a percentage of the total loan amount. The current loan fee for direct student loans for undergraduates is 1.062%.

You’ll also pay interest that accrues daily on your loan and will be added to the total amount you owe when repayment begins. Federal undergraduate loans currently have a 5.05% fixed rate, but it changes each year. Private lenders will use your or your co-signer’s credit history to determine your rate.

4. After you agree to the loan, your school will handle the rest

Your loan will be paid out to the school after you sign a master promissory note agreeing to repay.

“All the money is going to be sent through and processed through the financial aid office — whether it’s a federal loan or a private loan — and applied to the student’s account,” says Joseph Cooper, director of the Student Financial Services Center at Michigan Technical University in Houghton, Michigan. Then, students are refunded leftover money to use for other expenses.

5. You can use loan money only for certain things

Loan money can be used for education-related expenses only.

“You cannot use it to buy a car,” says Robert Muhammad, director of the office of scholarships and financial aid at Winston-Salem State University in North Carolina. “It’s specifically for educational purposes: books, clothing, anything that is specifically tied to the pursuit of their education.”

You can’t use your loan for entertainment, takeout or vacations, but you should use it for transportation, groceries, study abroad costs, personal supplies or off-campus housing.

6. Find out who your servicer is and when payments begin

If you take federal loans, your debt will be turned over to a student loan servicer contracted by the federal government to manage loan payments. If you have private loans, your lender may be your servicer or it may similarly transfer you to another company.

Find your servicer while you’re still in school and ask any questions before your first bill arrives, says John Falleroni, senior associate director of financial aid at Duquesne University in Pittsburgh. They’re also whom you’ll talk to if you have trouble making payments in the future.

When you leave school, you have a six-month grace period before the first bill arrives.


6 Things Students Need to Know During the Coronavirus (COVID-19)

Transferring schools? 6 things to know about your student loans

This was crossposted from the U.S. Department of Education blog, Homeroom.

Whether you’re currently in college for a few years or have recently returned to college, we understand this is a time of uncertainty. You may be wondering how the impact of the COVID-19 emergency affects your federal financial aid. Below, we’ve outlined flexibilities that are available to students during this time.

1. Tuition Refunds and Credits

Due to COVID-19, some schools closed and many classes moved online or were cancelled.  As a result, your school may offer you a refund that you can use to pay existing loan debt or a credit that you can use to pay for future education-related expenses. For more information about your school’s current policy, contact the office of the bursar or your financial aid office.

If you accepted a larger loan amount to help pay for room and board but your situation has changed due to COVID-19, you can return part of the aid you received to lower your total balance owed. Talk to your school for more details.

CARES Act Emergency Grants to Students

On March 13, 2020, President Trump signed into law the CARES Act, which provided additional funding to institutions of higher education to make Emergency Cash Grants available to eligible students.

The purpose of these grants is to provide financial support to students who may have experienced disruptions related to COVID-19.  The grant may be used for tuition, housing, food, childcare, supplies, computers, transportation, and other education-related expenses.

For tax purposes, these grants are considered emergency assistance (not financial aid grants or scholarships).

These grants must be paid to you in cash (which could include a pre-paid card or other electronic method) and should be used at your discretion to pay for necessary expenses. For example, your school couldn’t apply your grant to outstanding balance on your account without your permission. Additionally, these grants should not be subtracted from your financial aid eligibility or award.

Your school may develop its own formula for determining who should receive an Emergency Cash Grant, and not all students are eligible.

 Your school is required to disclose on its website how it is distributing these funds, how many students have received this grant, and how many dollars have been distributed to students.

 Reach out to your financial aid office to see if you are eligible to receive an Emergency Cash Grant during the fall term.

Federal Financial Aid Adjustments

Although schools are not required to adjust federal financial aid awards, they can consider your special circumstances, such as unanticipated loss of income, and make appropriate adjustments to your aid award.

If this applies to you, contact your financial aid office immediately for information about how to request a special circumstances review.

Restoring Grant and Loan Eligibility

Both federal grants and federal student loans have maximum lifetime limits, meaning that once you’ve received the maximum amount, no additional aid will be available to you.

If you withdrew from college due to COVID-19, you may be eligible to have Direct subsidized loans, TEACH grants, or Pell grants you received during that term excluded from your maximum limit.

This means your eligibility for future TEACH grants or Pell grants will be restored.

It is always a good idea to check your lifetime utilization to be sure you do not run aid eligibility before you complete your program. Log in and view your dashboard to check your Federal Pell Grant Lifetime Eligibility use.  Learn more about lifetime limits and how they are calculated.

Federal Work-Study (FWS) Wages

If you were denied FWS wages for a job you started and were displaced from due to COVID-19, check with your financial aid office to see if you can be paid those lost wages now.

  If you did not start your FWS job prior to March 13, 2020, and have been denied an opportunity to work because of COVID-19, check with your school’s financial aid office to see if there are other campus-based aid dollars available to replace lost FWS wages due to COVID-19.

Approved Leave of Absence

If your travel-abroad program was cancelled or you became ill, your school may have offered you the opportunity to apply for a leave of absence.

  If granted such a leave, your school may transfer the financial aid you received for that term over to your next term.

  Contact your school’s financial aid office to find out more about the current leave of absence policy and financial aid options available.

Satisfactory Academic Progress

You must meet your school’s standards for satisfactory academic progress (SAP) toward a degree or certificate in order to continue receiving federal financial aid.

Satisfactory academic progress may include completing a certain number of credits within a given period of time and may also include meeting minimum grade point average (GPA) requirements.

  If you believe that your failure to complete enough credits or meet minimum GPA requirements was the result of COVID-19, you should contact the school’s financial aid office to explain your situation.  The CARES Act provides some exceptions for students who failed to meet SAP due to COVID-19 hardships or interruptions.

4. 0% Interest Period and Historically Low Interest Rates

Direct unsubsidized loans normally accrue interest while you’re in school.  However, from March 13, 2020, to Dec. 31, 2020, the interest rate on all U.S. Department of Education (ED) owned loans was temporarily lowered to 0%.

Tip: If you can afford to make payments during this period, you will pay off your loan faster and lower the total cost of your loan over time.

To find out what type of loans you have, follow these steps:

  1. Visit
  2. After you log in with your username and password (FSA ID), you will be able to see your loan(s) listed on the Dashboard.
  3. Click “view details.”
  4. Scroll down to the “Loan Breakdown” section. If your loan(s) is owned by ED, you will see “DEPT OF ED” before the loan servicer’s name. These are the loans eligible for the 0% interest rate.

After Dec. 31, 2020, the 2020–21 federal student loan interest rates will apply. These are among the lowest fixed interest rates in federal student aid history.

Despite these low interest rates, always be sure to limit your borrowing to only what you need. To help you decide how much you can reasonably afford to borrow for school, use the College Scorecard. It has data for some schools on your potential salary after completing certain fields of study.

5. Transferring Schools

If you’re considering transferring schools or enrolling at a different school during COVID-19, research school-specific data with the College Scorecard. If you’re looking for a school in your area on the College Scorecard; click “Show Me Options” and select “Schools Near Me” to search within a set number of miles from your location.

Be sure to review how many credits the new school will accept work you already completed. If you plan to return to your regular institution after COVID-19, verify that credits earned at the school you plan to attend temporarily will be accepted by your home school.

Tip: Confirm that transferred credits will count toward the requirements of your major, not just as electives or general education requirements.

6. Postponing Your Education

If you’re thinking about delaying your education (e.g., taking a “gap year”) or pausing your education, here’s what that could mean for your financial aid.

Disclaimer: This article contains general statements of policy under the Administrative Procedure Act issued to advise the public on how ED and Federal Student Aid (FSA) propose to exercise their discretion as a result of and in response to the lawfully and duly declared COVID-19. ED and FSA do not intend for this article to create legally binding standards to determine any member of the public’s legal rights and obligations for which noncompliance may form an independent basis for action.


This article was written by Miranda H., a Digital Engagement Strategist at the U.S. Department of Education’s office of Federal Student Aid.


6 Things Students Need to Know During the Coronavirus (COVID-19) Emergency

Transferring schools? 6 things to know about your student loans

Whether you’re currently in college for a few years or have recently returned to college, we understand this is a time of uncertainty. You may be wondering how the impact of the COVID-19 emergency affects your federal financial aid. Below, we’ve outlined flexibilities that are available to students during this time.

6. Postponing Your Education

If you’re thinking about delaying your education (e.g., taking a “gap year”) or pausing your education, here’s what that could mean for your financial aid.

Disclaimer: This article contains general statements of policy under the Administrative Procedure Act issued to advise the public on how ED and Federal Student Aid (FSA) propose to exercise their discretion as a result of and in response to the lawfully and duly declared COVID-19. ED and FSA do not intend for this article to create legally binding standards to determine any member of the public’s legal rights and obligations for which noncompliance may form an independent basis for action.


Transferring Financial Aid to Another School

Transferring schools? 6 things to know about your student loans

Did you know that more than a third of college students decide to transfer schools at some point during their undergraduate studies?

The most recent data from National Student Clearinghouse Research Center, which surveyed 3.6 million college students who started their studies in 2008, shows that about 37 percent of college students transferred between universities during their undergraduate studies. Of those who chose to transfer, 45 percent changed schools more than once.

If you're using federal or private student loans to help pay for your education, transferring could affect what happens to them. Here are a few things students need to do to make sure it's an easy transition.

What Happens to Student Loans When You Transfer?

Many federal and private student loans offer automatic in-school deferment — meaning you don't have to pay your loans while you're enrolled in school at least half-time.

Transferring could affect your in-school deferment because you are technically leaving school when your enrollment ends at the first institution.

Any gap in enrollment could lead to your loans going into their grace period — the time frame students have before they must start paying their loans, typically six months.

“For there to be no lapse in a student's deferment status, a student must re-enroll at their new school within six months of ceasing to be at least a half-time student (withdrawing) at the prior institution and not have already used that six month grace period,” says Amanda Foskett, assistant director of Financial Aid and Student Services at Antioch University New England in Keene, New Hampshire.

Foskett notes that if the student meets these two requirements and is at least a half-time student at the new school, most schools will automatically report a student's enrollment status to the clearinghouse that lenders check regularly. Through this process the deferment status is automatically updated and there will be no lapse. It's always a good idea to double check your enrollment status with your student loan lender as well.

Settle Things with the Original School First

If you plan on transferring to a new school mid-year, you will need to take care of some things at the first institution so there is an easy transition with your student loans.

“The first step for any type of loan is for the student to notify his or her current school that he or she will not be returning,” says Foskett. “From there, a number of things should ly happen:

  • Future loan disbursements should be canceled
  • Registrations for any future coursework should be dropped
  • Any billing issues should be resolved and
  • Official transcripts should be requested.”

Foskett explains that some schools will automatically handle this once they learn a student will not be returning. Other schools may give students a checklist and they will have to take care of these items themselves.

Additionally, students with private student loans will also need to contact their lender to decrease their loan amount. They will have to apply for another private student loan if they need one for their new school.

Apply for a New Loan at Your New School

If you have federal Direct Subsidized or Unsubsidized Loans, you may only need to update your Free Application for Federal Student Aid (FAFSA) with the new Federal School Code. From there, the new school receives the updated FAFSA and awards aid accordingly. Keep in mind you may not receive the same financial aid award at your new school.

“There is always a chance that FAFSA transactions are selected for a process called verification,” Foskett says, “so there is a possibility the student will have to provide additional information before federal aid can be awarded.

The verification process can differ among schools, but it typically involves sending documentation to double-check tax and income information. The school also has the option to require additional information they deem necessary to verify any apparent discrepancies.

Students should be aware that even if they have undergone a verification process with the original loan, they may have to do it again for the new loan.

For federal Direct PLUS Loans for parents and graduate students, Foskett says students may need to submit a new application and credit check to for the new school to process the loan.

This is especially true if the original credit check has expired.

And, finally, Foskett says that students with private loans need to contact the lender to make sure future disbursements to their original school are canceled. They can then apply for a new loan, and if approved, the new school will certify and disburse the loan according to the new school's schedule.

Check to See if the Multiple Disbursement Rule Applies

Foskett notes that some schools disburse federal loans in at least two payments for the term with the second disbursement being made after the midpoint of the term. This rule applies only to federal student aid, but you should also check with your school about your private loan disbursements.

“When a student transfers mid-year and attends an institution for one semester only, sometimes this multiple disbursement rule still applies,” says Foskett. “This means that a federal loan must disburse in two portions during the one semester.”

If a student only attends a school for the spring semester, having just transferred, Foskett says that half of the federal loan may be disbursed in the beginning of the semester while the other half is disbursed mid-semester to fulfill the multiple disbursement requirement.

When it comes to tuition payments, she explains that this won't affect most students because the majority of institutions consider the tuition bill to be paid as soon as a disbursement hits the student's account, even if it's only a partial disbursement.

However, if the student is expecting a refund as a result of the disbursement to help with books and living expenses, then the refund could be held up until the loan is fully disbursed.

Foskett uses the example of a student who only needs $5,000 to cover direct expenses (i.e., tuition) at the new school but takes out a loan of $7,000 to help pay for books and room and board. This would result in a negative balance, or credit, and the student would receive a $2,000 refund.

Many students choose this option so they can afford to attend school, Foskett says. If there's any delay in that refund due to the multiple disbursement rule, then the student may not be able to pay for their living expenses.

If this might be the case for you, Foskett suggests contacting the financial aid office and asking how the federal loan is being disbursed and when to expect the refund. Each institution may do things differently so make sure to get the information as soon as possible.

Students who decide to transfer schools mid-year will need to take care of a few things for your federal and private student loans. Fortunately, the process isn't difficult and much of it is streamlined by the schools themselves. If you have questions, make sure to contact your school's financial aid office and your student loan lenders for help.


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