7 ways you can lose your student loan eligibility | finder.com
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7 ways you can lose your student loan eligibility

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Watch out for these common ways to lose eligibility — and what you can do if it’s too late.

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. To help you avoid common missteps, we take you through the top ways students become ineligible.

I already lost eligibility. What do I do?

What’s required to remain eligible for student loans

Federal and private student loans have slightly different eligibility requirements. While both require you to be at least a half-time student, federal loans can have more restrictions involving which schools qualify, your legal status and criminal history and even your grades while you’re in school.

Private student loan providers don’t care about your grades or run-ins with the law as much — they’re much more interested in your ability to pay back your loan.

Private loans also come with more leeway, as most 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.

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    How could I lose my eligibility?

    1. Drop below half-time

    • Loans it affects: Federal, private

    Both 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. With most classes counting for at least three credits each, this means you need to take at least two classes to be eligible.

    Losing your eligibility for that semester might not be the end of the world if you have other means to pay for it. 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 even mean that you’ll be on the hook for repayment right away.

    2. Get bad grades

    • Loans it affects: Federal

    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. Your grades could affect your student loan eligibility in some cases though — specifically for federal loans. 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 — whatever your school considers to be a satisfactory average.

    3. Fail courses

    • Loans it affects: Federal

    Aside from hurting your GPA, failing multiple courses means that you might not always be making satisfactory academic progress, another requirement for federal loans. In other words, 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. Typically you need to earn around 12 credits a semester to meet this requirement.

    4. Lose your legal status in the US

    • Loans it affects: Federal, private without a cosigner

    If you lose your green card status or laws change and you’re no longer considered an eligible legal citizen because your status was expired or revoked, you also aren’t eligible for federal student loans. Have private student loans? You’ll have to find a cosigner to borrow for next semester.

    5. Get incarcerated

    • Loans it affects: Federal

    You can’t get any federal student loans while you’re in prison. Once you’re released, you could still have trouble getting aid 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.

    6. Have an illegitimate high school diploma

    • Loans it affects: Federal, some private

    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 high schools 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 could no longer be eligible for federal student loans. You might also come across the occasional private lender that requires you to prove you have a high school diploma to qualify.

    7. Have a judgment lien on your property

    • Loans it affects: Federal, private without a cosigner

    Simply put, 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 who 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.

    What to do if I lose federal eligibility

    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. On top of that, you have several other choices for what to do next, which we discuss below.

    1. Try regaining eligibility

    Federal loans come with several different 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 up 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.

    2. Consider your next academic move

    Think about what your best options are for the immediate future and long-term. If you’re ineligible for loans over your academic performance, some schools require you to continue taking courses and show that you can improve your grades — without federal aid. Regaining eligibility you lost for legal reasons could be 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 repayment 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. Or you might want to consider taking out a private student loan.

    3. Go private

    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 repayments 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. But you won’t lose your funds because you failed a course or the government redefined your legal status.

    Compare private student loans

    4. Get a (higher than minimum wage) job

    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.

    5. Reach out to relatives for support

    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.

    Compare private student loans

    Rates last updated October 15th, 2018
    Name Product Min. Credit Score Max. Loan Amount APR Product Description
    Credible Private Student Loans
    Good to excellent credit
    Varies by lender
    3.69% (As low as ) (variable)
    Get prequalified rates from private lenders offering student loans with no origination or prepayment fees.
    EDvestinU Private Student Loans
    4.016%–10.010% (with Autopay) (fixed)
    Straightforward student loans for undergraduate and graduate students.
    CommonBond Private Student Loans
    3.20-7.25% (fixed)
    Finance your college education through this lender with a strong social mission and terms that fit your budget.
    LendingTree Student Loans
    Good to excellent credit
    Varies by lender
    3% (As low as) (fixed)
    Compare multiple student loans and student loan refinancing options in one place.

    Compare up to 4 providers

    Bottom line

    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.

    Frequently asked questions

    Anna Serio

    Anna Serio is a staff writer untangling everything you need to know about personal loans, including student, car and business loans. She spent five years living in Beirut, where she was a news editor for The Daily Star and hung out with a lot of cats. She loves to eat, travel and save money.

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