What Happens to My Student Loans if I Transfer Schools?
Understand how transferring schools affects your student loans. Learn to manage your existing debt and ensure a smooth financial transition.
Navigating higher education often involves unexpected changes, and transferring schools can be significant. Understanding how this transition impacts your student loans is important for managing financial obligations. Being informed about the student loan system’s rules can help prevent unforeseen repayment demands.
Impact on Your Existing Loans
When you transfer schools, your existing student loan status can change, especially regarding deferment and grace periods. Federal student loans generally offer an “in-school deferment,” allowing you to postpone payments while enrolled at least half-time at an eligible institution. This deferment typically applies automatically as your new school reports enrollment.
Interest accrues on unsubsidized federal loans and all private student loans during in-school deferment. This accrued interest may be added to your principal balance once deferment ends, increasing your total loan amount. For private loans, deferment terms vary by lender, often requiring direct communication to confirm eligibility.
A grace period is a set timeframe after you leave school or drop below half-time enrollment before loan repayment begins. For most federal student loans, this period is six months. If you transfer schools without immediately re-enrolling at least half-time, your grace period may begin.
The grace period is typically a one-time benefit per loan. If you previously used part or all of your grace period, you might not receive a new full grace period upon transferring. Should your grace period expire before you re-enroll at your new school, your loans will enter repayment.
Actions During Your School Transfer
When transferring schools, proactive steps are necessary to manage your student loans and financial aid effectively. Update your Free Application for Federal Student Aid (FAFSA) with your new school’s information. Financial aid, including federal student loans, does not automatically transfer between institutions.
Log into your FAFSA account and add the new institution to your application. This ensures the new school receives your financial information to determine your eligibility for federal aid. If transferring mid-year, you can often update your existing FAFSA rather than completing a new one.
Beyond updating your FAFSA, it is advisable to contact your student loan servicers directly. While schools report enrollment status to the National Student Clearinghouse, confirming your enrollment can prevent miscommunications. This step is especially pertinent for private loans, as their deferment policies are not standardized and may require you to initiate the request.
Maintain open communication with the financial aid offices at both your old and new schools. Your former school’s office can guide you on remaining obligations or aid adjustments. The new school’s office can clarify its financial aid processes, deadlines, and how your aid package will be structured.
Understanding Enrollment Gaps
An enrollment gap, a period of non-enrollment, directly affects your student loan status. If you are not enrolled at least half-time, your federal student loans will typically enter their grace period. This six-month window allows for a transition before repayment obligations begin.
Should the enrollment gap extend beyond the grace period, your loans will move into active repayment. This can occur if you take time off before enrolling in a new institution. Even if you plan to re-enroll, the grace period clock starts ticking once you cease to be at least a half-time student.
For federal loans, maintaining at least half-time enrollment is typically required to keep your loans in an in-school deferment status and prevent the grace period from starting. If you withdraw from your current school and do not immediately enroll in a new one, this can trigger the start of your grace period.
Once a grace period is exhausted, it generally will not be granted again for the same loan, even if you re-enroll. Therefore, a prolonged break in enrollment can lead to your loans entering repayment sooner than anticipated, potentially requiring payments while you are still a student.