Federal student aid can be in the form of Grants, Loans and Work- study. Federal student aid can be used by a borrower to pay for expenses such as tuition fee, transportation, books and various indirect expenditures such as computer and living costs. This financial aid can come from the Federal government or the state where the student is living, his/ her college or institution or any non-profit, private organization working towards the cause of education. Sometimes, some students might lose their eligibility for federal financial aid due to various reasons such as default on a previous student loan or poor academic record in the school or college or if the student is convicted for drug use.
Eligibility can also be lost if the individual no longer satisfies any one or more of the eligibility criterion or has changed his/ her majors in the course of study due to which one might no longer qualify to obtain a certain grant or financial ad plan. For example, the Teacher Education Assistance for College and Higher Education (TEACH) Grant is available only to people who wish to pursue a career in teaching and serve low- income groups of the economy in areas with shortage of such services. However, this loss of eligibility can be regained by consulting the financial aid officer for help and working towards the right direction. The following section deals with the situations that can lead to loss of eligibility and respective remedies to such situations.
Things to do to regain lost eligibility
Defeating Default: The borrower with a default student loan loses the eligibility for further financial help. However, once repaid, the eligibility can be regained. There are various options available for a borrower to get his/ her loan out of debt. These are Loan Repayment, Loan Consolidation and Loan Rehabilitation.
- Loan repayment: Loan repayment implies paying off the default loan completely. Repayment for Direct loans is to be made to the US Department of Education, whereas repayment for Federal Family Education Loan programme loans is assigned to the specific guaranty agency. For defaulted Federal Perkins loan, the borrower needs to contact the college or school from where the loan was availed to learn about repayment options.
- Loan Consolidation: Student loan consolidation is an act of gathering all debts into one lower interest rate loan. This helps the borrower to combine all his loan repayments in one loan and regain control over his/ her finances. Loan consolidation in case of student loan allows the student to repay a loan in a period of up to 30 years. Such a consolidation permits the borrower to have fixed interest payment on one’s loans rather than variable interest rates. The fixed interest payment for a consolidated loan is decided by the weighted average of the current interest rates of the multiple loans by rounding them up to closest of one- eighth of one percent. Generally, the Department of Education demands three voluntary, on- time, consecutive payments towards debt before consolidation.
- Loan Rehabilitation: Rehabilitation of student loan is when the loan has been repurchased by a lender and the outstanding charges have been added to the existing principal amount of loan. But this happens only after the borrower has made the agreed upon, voluntary payments towards debt. This agreement of mutually reasonable payments is made between the borrower and the Department of Education in case of Direct and FFEL loans, and between the borrower and the school in case of Federal Perkins loan. Rehabilitation implies regaining the lost benefits of a student loan such as Forbearance, deferment, repayment plan choices, loan forgiveness and discharge and the ability to take out further federal student financial aid.
Satisfactory academic scores: To maintain one’s eligibility for financial aid every year, the student needs to score enough grades and complete classes and hours of study that are enough to meet the requirement. Each school follows their own satisfactory academic scores policy which mentions about the grade- point average that needs to be maintained, the number of credits that the student needs to have at the end of every year, the frequency of evaluation of one’s academic progress and growth, and the effect of multiple factors such as withdrawal, incomplete classes, change of major on the academic performance. The student should be very clear about each specification of this performance policy. The best way to regain lost eligibility in this case is to talk to the concerned school and see if the decision of ineligibility can be appealed and the eligibility can be regained.
Incarcerated individuals: Individuals who are ineligible to obtain a certain student financial aids, because of incarceration, have to wait till their release for any aid to be availed.
Cases of excess federal aid: For individuals who have crossed their limit of availing federal financial aid, it becomes impossible to avail any further aid from the Department of Education. To regain eligibility for further aid, the individual needs to pay back the excess aid either all at once or in small amount at a time. In some cases, the further aid is adjusted as per the excess aid that has been already availed.
High School diploma issues: I may happen that you believed that you have a high school diploma, but it turns out that you indeed don’t. For people in such circumstances and people with no diploma or an equivalent in the form of a certification of General Education Development (GED), the best way out is to contact the financial aid office at the concerned school.
Property with judgement lien: For individuals owning a property which is subject to a judgement lien for a loan owing to the US, the debt has to completely paid back for regaining eligibility.
There are numerous ways to come out of ineligibility for federal aid and benefit from its advantages. What is required on part of the student is awareness and clear understanding of these plans. It is interesting to note that the US Department, through its policies is eager to help people with genuine need of financial aid. But it must be understood that to fully avail the benefits of these policies and plans, one requires self motivation and financial awareness.