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With such high tuition costs, losing access to your student loans can mean the end of your college career, especially if you don’t know what your other options are. Avoid these seven common issues to protect yourself. And if you’ve already lost eligibility, learn the solutions you can use to stay in school.
Federal and private student loans have slightly different eligibility requirements. While both require you to be at least a half-time student, federal loans may have more restrictions involving which schools qualify, your legal status and criminal history and your grades while you’re in school.
Here is a list of basic eligibility requirements for federal student loans:
Private student loan providers don’t generally care about your grades or run-ins with the law — they’re much more interested in your ability to pay back your loan. Because of this, you’ll have to check with your provider to be sure you meet eligibility requirements.
Most private student loans also allow you to apply with a cosigner. With some lenders, you can meet virtually none of the requirements for credit score, legal status or income and still get approved as long as you apply with a cosigner who does.
There are a number of ways you could lose eligibility, but these are the most common and could easily impact your ability to continue your college education. If you already lost your eligibility, find out what you can do to regain it.
Private and federal student loans require you to be registered at least half-time to qualify for financing that semester. Generally, this means you must register for at least six credits a semester when you’re getting a four-year undergraduate degree. Most classes count for at least three credits each, which means you need to take at least two classes a semester to remain eligible.
Losing your eligibility for that semester might not be the end of the world if you have other means to pay for your tuition or other living expenses. The main danger of dropping below half-time is that your student loan repayment plan will kick in. For most types of federal loans, this means that you’ll have to start making repayments six months after the previous semester ended. For private loans, this could mean you’ll be on the hook for repayment right away, which could severely impact your ability to attend school in the future.
As we mentioned before, private lenders don’t care much about grades — with the exception of Discover, which gives cash rewards to students who make a 3.0 GPA. However, your grades could affect your federal student loan eligibility. To stay eligible for federal student loans or any other type of federal aid, you typically need to maintain at least a 2.0 GPA or a C average — whichever your school considers to be a satisfactory average.
Aside from hurting your GPA, failing multiple courses means that you might not always be making satisfactory academic progress, which is another requirement for federal loans. You need to pass enough courses to be on track to graduate within a reasonable amount of time, usually around six years for an undergraduate degree. Failing too many courses could set you behind on your degree progress and drop your GPA below the minimum requirement.
If you lose your green card status or you’re no longer considered an eligible legal citizen, you also aren’t eligible for federal student loans. If you have private student loans, you’ll have to find an eligible cosigner to help you borrow for next semester.
You can’t receive any federal student aid while you’re in prison. Once you’re released, you could still have trouble getting a federal loan if you were convicted of a sexual- or drug-related offense — you’ll have to fill out a worksheet with your FAFSA application. You might also be required to go to rehab and pass a couple of drug tests to regain your eligibility.
While this isn’t something you need to worry about if you attended and graduated from high school, you might if you got an equivalency. Some students have been scammed into paying for illegitimate high school diplomas through online programs that claimed you could earn an “official” diploma by paying a couple-hundred dollar fee and taking their online multiple-choice test.
If you don’t have a GED or legitimate equivalent, you may not longer be eligible for federal student loans. And you might also come across the occasional private lender that requires you to prove you have a high school diploma to qualify.
A judgment lien is when a court rules that a creditor can hold something that proves ownership of your property (like your home or car) until you pay off a certain amount of money. If you don’t, your creditors have a right to sell your property.
If you have a judgment lien on property over debt to private lender, you don’t have to worry about federal loans. If it’s over debt to the federal government, then you’ll have to pay it off to qualify for more federal funding.
Regardless of which institution you owe money to, having a judgment lien on your property likely means that you won’t have the credit rating to qualify for a private student loan on your own. This is where a cosigner comes in handy, but unfortunately, this may indicate to a potential cosigner that you aren’t good with your money, making it that much harder to qualify.
The good news is that most of these scenarios only apply to federal loans, meaning that you aren’t totally out of options when it comes to borrowing to pay for school.
Federal loans come with several options to regain your eligibility depending on how you lost it in the first place. It could be as simple as doing some extra course work to improve your grades or as involved as completing a rehab program.
Reach out to your financial aid office and your academic advisor to find out what you can do to regain your eligibility and continue with school.
Think about what your best options are for the immediate future and long-term goals. If you’re ineligible for loans because of your academic performance, some schools require you to continue taking courses and show that you can improve your grades — without federal aid. And regaining eligibility you lost for legal reasons is often even more drawn out and expensive.
This simply isn’t feasible for some people, but as soon as you drop below half-time, the countdown begins to when your first loan payment is due. To cut down on costs, you might want to consider dropping to half-time for a semester or even switching to a less expensive school. If neither of these are feasible, you might want to consider taking out a private student loan instead.
Private student loans are designed to cover education costs where federal loans don’t come through. If you’re no longer eligible for a federal loan, then they might be your best bet for staying in school and avoiding having to make payments on a degree you never get.
If you don’t have a credit score or a full-time job, you’ll need to apply with a cosigner. And unlike a federal student loan, a cosigner means you’re unlikely to lose your funding because you failed a course or the government redefined your legal status.
These days, paying your way through college is a pipe dream of a time when $0.10 seemed like a reasonable price for a cheeseburger. But that doesn’t mean that working can’t help. While you won’t be able to fully cover your tuition and living expenses by working part time — let alone full time — it can help you cut down on how much money you need to borrow (or ask for).
Try looking for a job that pays above minimum wage to make the most of the hours you spend away from school. While you might be able to find something on campus, don’t let your school restrict you. Even working at a well-paying fast-food chain can sometimes pay more than your college library will.
You don’t have to ask your family to cover the cost of your entire degree. In fact, you don’t need your family to give you money at all to support you while you try to regain your eligibility or finish a degree without federal aid.
Moving back home is one easy way to cut down on college costs without destroying your parents’ personal finances, if it’s an option. Another way your family can provide support is by helping you find a higher-paying job using family connections and resources. They can also help you by cosigning a private student loan or even lending you the funds with interest.
A good rule of thumb to avoid losing your student loan eligibility is to keep your grades up, stay on track to graduate and stay out of jail. Even if you take these steps, it could be a good idea to be aware of your options in case you lose your eligibility for reasons beyond your control, like losing your citizenship status.
If you’ve already lost your eligibility for federal student loans, you might want to visit out student loans page to learn about and compare your student loan options.
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