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How Transferring Colleges Can Affect Financial Aid

Your financial aid doesn’t automatically transfer with you, experts say.

Whether it’s to find a better fit for a major or to attend college closer to home, many students transfer from one university to another. In addition to considering the academic and social factors of moving schools, students should also be aware that transferring schools can affect student loans and their overall financial aid package, including scholarships and grants.

While credits earned at one school can transfer to another, many financial aid packages won’t. That’s because the cost of attendance at a school is a factor in determining financial aid award and eligibility for student loans. Additionally, most scholarships and some grants are specific to an institution, so you may lose that money upon transferring.

Students who qualify for federal loans and grants, such as Pell Grants, should also qualify for them at their new school, but there’s a process to follow in order to reestablish federal aid at a new school.

“It isn’t seamless. It’s not automatic,” says Jill Desjean, senior policy analyst for the National Association of Student Financial Aid Administrators. “You need to make sure your other school gets added to your FAFSA, and the other school will need to get that information because that determines your eligibility.”

It also matters when you transfer. Federal financial aid is distributed throughout an “award year,” which is typically July 1 of one year to July 1 the following year, so transferring within or outside of that could determine your next steps in completing the proper paperwork. An overlap of academic years affects the amount you’re initially eligible to borrow at the new school, according the U.S. Department of Education.

If you leave a school for any reason at any time or you drop below half-time enrollment, you’ll be required by the U.S. Department of Education to complete exit counseling through the Federal Student Aid website. This is a short online form where you’ll learn about federal student loan repayment and explore repayment strategies.

If you enroll at a new school, whether through initial enrollment or transfer, you must complete entrance counseling, where you’ll receive information about the terms and conditions of your federal student loan, when repayment will begin, how interest works and how to avoid delinquency or default.

Regardless of when you transfer, you need to list your new college on your FAFSA, or Free Application for Federal Student Aid. Your financial aid award at your new school will be based on several factors, including when you transfer, your expected family contribution and the cost of attendance at your new school.

In addition, some loans like Parent PLUS loans or private student loans allow you to borrow up to the cost of attendance at your school. If you have this type of loan and the cost of attending your new college is significantly higher or lower than your current school, the amount that you are eligible to borrow can change.

This likely won’t have an impact on your ability to finance your education, though, since the amount that you can borrow is aligned to your costs. But it’s helpful to know how and why the amount you can borrow may change.

Here are some other things you should understand and consider when looking at the financial impacts of transferring.

Transferring Mid-Year

If you’re transferring in the middle of a school year and plan to use federal financial aid, you’ll need to update your FAFSA for that current school year to include your new school’s information.

Too often, this step is overlooked, says Tina Steele, founder of The FAFSA Guru.

“Students should do this before they even apply for admission at the new college,” Steele wrote in an email.

If you were approved for financial aid for a specific award year but transfer mid-year, academic terms you complete that fall within that time frame would be considered part of that award year, Desjean says. Federal loan amounts for award years don’t fluctuate, so you can reasonably expect to receive aid at your new school. But that process doesn’t happen automatically.

You will be able to borrow only an amount equal to the difference between the applicable annual loan limit and the amount you borrowed at your previous school for the same academic year, according to the Department of Education. You may also need to officially withdraw from your current school and request to have your remaining financial aid at your current school canceled.

As a mid-year transfer, you don’t risk losing access to Pell Grant money, as all that’s required is adding your new school to your FAFSA. However, your Pell Grant eligibility at your new school is reduced if you received Pell Grant money for the same award year at a prior school, according the Federal Student Aid website.

If you received the Federal Supplemental Educational Opportunity Grant, whether you will receive it at the college you transfer to will depend on that school and if it has any FSEOG money left to award, Steele says.

“And the same goes for federal work-study. It all depends on the college they are transferring to as to whether or not they will get awarded these types of aid,” she says.

Transferring mid-year may also cause you to miss out on certain types of aid, particularly state-issued aid or school-specific grant money. Due to a limited amount of aid that’s distributed first come, first served, there’s a chance the school you’re transferring to has already given out all of its aid for that academic year, experts say.

“Many times, schools’ budgets are different for midterm students,” says Julie Gross, owner of College Financial Consultants, a private consulting firm that helps students navigate financial aid. “So I would recommend to only go for fall semester transfer and to really do your due diligence to look into the schools you’re thinking of transferring to.”

If you transfer in the middle of the school year and use private loans, you may need to alert your lender about your transfer so that it doesn’t send money to your old school.

Transferring After a Full Academic Year

If you’re planning to transfer at the end of a school year, include your new school when you fill out a new FAFSA for the upcoming year and inform your current school that you plan to transfer.

Also, check with the financial aid office to make sure your account is fully settled, otherwise your current school could withhold your transcript, according to the FSA website.

For the 300-plus colleges, universities and scholarship organizations that use the CSS Profile, another application for institutional financial aid, transferring students will need to update that as well.

To submit a FAFSA update or to add your new school, log in to fafsa.gov using your FSA ID, add your new school’s information and submit the update. To do the same for your CSS Profile, you need to have a College Board account, input tax documents, add your new school’s information and submit the update.

The Department of Education suggests you communicate with financial aid professionals at your current school and your new school about any steps you need to take and deadlines you need to meet regarding your financial aid.

Your Financial Aid Award May Change

A mistake students often make when transferring is assuming their financial aid package will transfer or be comparable at their new school, Steele says. In many cases, it will likely be similar, but there are exceptions.

The maximum amount you can borrow each year in direct subsidized loans and direct unsubsidized loans ranges from $5,500 to $12,500 per year, depending on what year you are in school and your dependency status, according to the FSA website. But since each school’s cost of attendance is factored in, whether your aid amount is similar at a new school largely depends on the type of school you transfer to.

Transferring from one in-state public school to another with similar cost of attendance will yield similar aid amounts, experts say. But there will likely be differences when transferring out of state or from a public school to private school or vice versa.

“If you want to transfer from a private university to a public university, it might actually be more expensive if you were getting a lot of institutional grant aid from the private school. That would not follow you,” Gross says. “It’s important to understand the type of aid you’re receiving and if that’s going to be maintained at the school you’re transferring to.”

Some state grants require you to attend an in-state school, and you could lose access to these funds if you choose a new school in a different state. And some colleges have more aid to distribute than others. Similarly, many scholarships are institution specific. If you decide to transfer, you risk losing scholarship money for your current school.

Experts recommend transferring after a full academic year for several reasons, one of which is to make sure you have access to the full amount of federal student loans available since the amount of federal money you have access to increases each year you’re in school. This can help in cases where the cost of attendance at your new school is significantly different than your previous school, says Ronald Ramsdell, founder of College Aid Consulting Service.

“If they’re attending a college where they got a certain amount of loans and they exhausted all that loan money for payment of the tuition cost, and they’re transferring to a more expensive college, those loan amounts may not be appropriate to afford that school.”

Many schools offer institution-specific scholarships for transfers, but those might be limited depending on the school, Steele says. Still, numerous scholarships are available for transfer students from outside organizations.

“It can be a bit tedious, searching and applying for them, but with consistency it can make a big difference in their bottom line,” she says. “And there are scholarships out there for everything from academics to a student’s interests, abilities, disabilities, the state they live in, what they’re studying and more.”

You’re Still Obligated to Repay Student Loans You Already Received

If you accept federal student loans, you’re obligated to pay them back for any college credits they’re used for, whether or not you complete the degree or if the credits transfer to a new college.

Federal student loans enter repayment status six months after you leave school or drop below half time. If you plan to transfer, do it within that six-month window so that your student loans can enter in-school deferment.

Once you begin at your new school, your subsidized loans from your previous school won’t accrue interest during in-school deferment, but unsubsidized loans will. Private student loans may have gone into repayment from the date they were distributed. Experts suggest contacting your lender if your situation requires deferment.

Transferring can cause you to stay in college longer if credits don’t transfer, which can affect how far your financial aid goes in paying for your entire degree, experts warn.

“There are lifetime limits on Pell Grants and direct loans,” Desjean says. “So if you have to do a fifth year or a sixth year for a four-year degree because you transferred and lost credits, you could end up running out of eligibility for a Pell Grant or direct loans.”

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