There are many reasons why students may need to drop out of college. Whether it be for health, family, or other life hiccups, it’s possible that you may need to take time off from school, which will inevitably impact your financial aid. 

Nearly 85 percent of all students are awarded financial aid, many of which become concerned if they decide to leave a semester because they depend on this money to return. 

If this sounds like you, you may have many questions:

  • What happens to that money if I leave school this semester? 
  • Will I be faced with re-paying a full student loan that I didn’t use? 
  • Can I keep any of the need-based aid?

In this financial aid guide, we’ll walk you through all you need to know about what happens to your student loan if you need to leave school. From federal to state and even school-based student loans, we’ll help you understand the specific criteria to qualify for assistance and what steps to take if you can’t meet these criteria. 

What Is Federal Basic Eligibility Criteria?

Federal Basic Eligibility Criteria includes a few things. Usually, the minimum criteria include enrollment. 

To receive any student financial aid (especially federal aid), you’ll need to meet all of the following requirements:

● You must demonstrate an active need for financial aid.

● You must be a United States citizen or an eligible non-citizen.

● You must provide a valid Social Security number. Note that there may be some U.S. territorial exceptions to this rule.

● You must be registered with Selective Service (military) if you are male.

● You must be enrolled at least half-time each semester to gain access to direct student loans.

● You must maintain satisfactory academic progress, known as SAP, based on your individual institution’s rules.

● You must submit only accurate, truthful information when filling out your Free Application for Federal Student Aid form.

● You must prove that you are qualified to attend a university with a GED, a high school diploma, or some other equivalent.

Financial Aid Rules on Class Withdrawal or Dropping Out

What happens to your financial aid when you leave school depends on the kind of aid you currently have. The three most common types of financial aid are: 

  • School-based 
  • State-based
  • Federal student aid


Your school’s policy on financial aid is unique. Therefore, it’s critical to get in touch with your financial aid office or the university’s registrar to understand what specific requirements you must meet. 

Some examples of university policies on withdrawal regarding financial aid include:

● Many schools consider unofficial withdrawal grounds to cancel your student aid for any remaining semesters. This could happen if you stop attending classes or come infrequently, resulting in a failing grade.

● Telling your financial aid office and loan providers in advance that you need to drop out will give you the best shot at managing any loan repayment and stopping penalization.

Schools understand that things happen, and they will try to work with you. However, if you drop out without notice or explanation, you’ll likely be faced with major penalties, exclusion from other types of aid, and possibly even damage to your credit score. 


Some states will offer need-based scholarships or grants to students who are state residents. Typically, you must also attend a college within that state. 

Most of the time, requirements for state need-based financial aid include: 

  • Legally residing in the state where you attend university 
  • Enrolling in a specific amount of credits

Certain grants or scholarships may allow you to stay enrolled only half the time, but most require a full-time schedule. Typically, this means at least 12 credit hours per semester.

If you drop out of drop below the required amount of credit hours, you will no longer qualify for these grants or scholarships.


Federal aid comes in many forms, the most common being student loans, Supplemental Educational Opportunity Grants, or the Pell Grant

The Pell Grant federal aid program will award students up to $6195 per academic year based on financial need. This grant assumes that you will be in college full time. If you choose only to enroll part-time, the federal grant you receive will be prorated to match this. 

If you drop courses or drop out after the add/drop period of the semester, you will need to pay the grant money back. You may either return the federal grant if it’s unspent, use school account money to pay it back, or get billed by the university at a later date. The same goes for the Supplemental Educational Opportunity Grants. 

Subsidized federal loans for students, on the other hand, give you a grace period, and this includes withdrawing from university. You will still be legally required to pay back the federal loan, but your principal loan amount will be smaller since you will not have spent the full amount of time in school. 

Unsubsidized loans do not allow for a grace period, but you can work with your federal loan provider for a deferment or a forbearance. You may be able to pay off your interest while halting payments on the principal loan amount.

Can I Get My Financial Aid Back if I Return Later?

There are only a few instances in which you can get your aid back after dropping out. You may be able to appeal your school’s decision that you were not making satisfactory academic progress and show them that you can live up to the standard coming back. 

If you withdraw and pay back the payments you are required to make, you will remain in good financial standing with the United States Department of Education, and you can still reapply for some programs later. 


Many students feel the need to withdraw from school due to family dependents, a serious health issue, or unmanageable financial struggles. If you give your school and any loan providers ample notice, you may be able to formalize your withdrawal, allowing for the chance to reapply for aid at a later date through FAFSA.

You may also be able to apply for private loans if you decide to come back later. 

While withdrawing from school is a big decision, doing so the right way can leave doors open for education loans in the future. However, you should make sure you’re fully educated on your options before making any decisions.

Our financial aid calculator, created by our founder, Jasmine Chigbu, creates a tailored vision of your necessities. Jasmine is an expert on scholarships — that’s how she paid for all four years of medical school. Trust the people that know scholarships and reach out to GrantEd today.

Sign up for a FREE account at GrantEd be matched with over 2000 scholarships in our database. 

Sign Up