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How transferring schools affects your student loans
6 steps to take to make sure you're covered the next academic year.
One of the drawbacks of transferring schools is that it can make the already-complicated financial aid process even more difficult.
Repayments start earlier. You’ll have to coordinate between schools, lenders and servicers. And in the worst cases, you might even end up having to refinance to afford repayments.
Can I transfer my student loans when I switch schools?
Generally, no. Federal student loans don’t transfer between schools and neither do most private student loans. That’s because financial aid works differently at different schools.
Your new school might not offer the same types of student loans you previously had. The cost of attendance can vary between schools, so you’ll likely be eligible for different loan amounts. And the school you attend can also sometimes affect the rates and terms of some private student loans.
What happens to my current student loans when I transfer schools?
Typically, your student loans go into repayment when you transfer schools, though it depends on what type of loan you have. Most federal and private student loans allow you to defer repayments while you’re still a full-time student. This means you would need to start paying back your loans only after you either drop below half time or graduate.
But you won’t have that six-month grace period before repayments start. And some private student loan providers don’t offer in-school deferment at all. In that case, your grace period would kick in when you leave your old school and you or your cosigner would be responsible for full repayments after it’s up, regardless of your enrollment status.
6 steps to take when transferring schools
Working out your financial aid when you transfer schools might be more complicated than you think. These six steps can help you make sure you’re covered for the next academic year.
1. Notify the financial aid offices at both schools.
Before you transfer, contact your former school’s financial aid department to cancel any financial aid that you were set to receive for the next semester or academic year. Also take steps to make sure you’re fully withdrawn from the school by the deadline. If you’re still registered as a matriculating student, then you might owe fees for the next semester.
You also need to reach out to your new school’s financial aid office to let them know you’re going to need student loans for the following semester. They should guide you through the steps you need to take to apply for student loans and other financial aid with that particular school.
2. Contact your student loan servicers.
If you have private student loans, reach out to the company that handles your student loan repayments to inform them you’re transferring schools. They’ll let you know what steps you need to take to apply for in-school deferment or guide you through other deferment and forbearance options available to you.
If deferment or forbearance aren’t on the table, ask if you can sign up for a reduced or income-based repayment plan. Some lenders might be willing to do this even if they don’t advertise it in special circumstances. Otherwise, talk to your cosigner about managing repayments in school or consider refinancing with another lender that offers in-school deferment.
3. Resubmit or update the FAFSA.
Starting a fresh school year? First thing you should do is resubmit the Free Application for Federal Student Aid (FAFSA) — even if you’re not applying for federal loans. Your status at your new school could make you eligible for other of types of financial aid like grants and work-study programs.
Already in the middle of the year? No need to resubmit. Just log in to your Federal Student Aid (FSA) account and update your FAFSA with your school’s information.
4. Reach out to your private lenders.
Many private lenders approve you for the full year — or in the case of Citizen’s Bank, multiple years. However, transferring to a different school means those loan amounts, rates and terms probably no longer apply.
You need to cancel any pending student loans before your lender disburses them to your old school. Otherwise, you need to work with your old school’s financial aid office to return the funds.
5. Apply for new loans, if necessary.
If you had to cancel your private student loans, you might need to reapply to receive funds at your new school. There’s a chance your new program might not be eligible for the same loans that you previously had. In that case, you need to find another lender.
Even if you’re still eligible, you might want to take the opportunity to prequalify with a few other lenders. You might find a better fit, since your school has changed.
6. Rework your budget
Transferring schools might affect how your student loans are disbursed. This could be a problem for some students that rely on student loan refunds to cover living expenses.
How so? The Department of Education allows schools to disburse federal Direct Loans up to two times a year. If you transfer in the middle of the year, your school might break up your loan disbursal into sections per semester, meaning you won’t receive your full refund up front. Ask your school’s financial aid office how disbursal works so you can come up with a budget.
Compare private student loan providers
Look for free aid before taking out new loans
Going to a new school might open you up to a whole range new financial aid opportunities. Be sure to consider free options like scholarships and grants before you apply for student loans — especially if you can’t qualify for federal loans. Check with your school’s financial aid office and look into opportunities from outside organizations.
Bottom line
Transferring schools might help you get on the career path that’s right for you. But it can be a headache coordinating financial aid. Plan ahead and make sure to stay in contact with your lenders, financial aid offices and servicers until the transition is complete.
You can read more about how student loans work by checking out our guide.
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