Can You Go to College and Still Receive Financial Aid Even If You Owe Prior Student Loans?

If you had to pause your college education, you may be eligible for financial aid when you return to school. Lots of people take time off from pursuing a degree. You may have taken time off to help family or to deal with a health challenge, or you may be pursuing an additional degree, like a second bachelor’s degree or a master’s degree. As long as you aren’t currently in default on your student loans, you may be able to get financial aid for college.

TL;DR (Too Long; Didn't Read)

You may receive financial aid to attend college as long as you're not in default on existing student loans.

Eligibility for Grants

Grants are a type of financial aid that’s essentially a gift. In most cases, you don’t have to repay grants. You do have to meet eligibility requirements, though. Federal Pell Grants are given to students getting an undergraduate degree. If you already have a bachelor’s degree, you are generally not eligible for a Pell Grant, but there may be an exception made if you’re pursuing a teaching certificate.

You must show you have financial need to receive a Pell Grant. If you haven’t earned a degree, you may be eligible for a Pell Grant even if you have student loans. Pell Grants can be awarded for up to 12 semesters of school.

The Federal Supplemental Educational Opportunity Grant is awarded by school financial aid offices. It is also for undergraduate students, so if you already have a degree, you won’t be eligible. Your school will let you know if they offer this grant and if you’re eligible.

Eligibility for Loans

Unsubsidized and subsidized loans help you pay for your education. Once you’re finished with your college education, you begin paying back the loans. You can receive additional student loans even if you already have student loans, as long as the loans are in good standing.

With subsidized loans, the interest is paid by the U.S. Department of Education while you’re in school at least half-time, when you defer your payments and during your grace period. Undergraduate students who show financial need may be eligible for subsidized loans.

Unsubsidized loans are available to graduate and undergraduate students, and you don’t need to show financial need. You are responsible for paying all the interest that accumulates on the loan. There is a limit to how much you can borrow in student loans. As of 2019, dependent students can borrow up to $31,000 and independent students can borrow up to $57,500 for undergraduate study and up to $138,500 total for both graduate and undergraduate study.

Getting Out of Default

If you’re in default on your student loans, you will not be able to receive any financial aid. You can get your student loans out of default by either rehabilitating your loans or by consolidating your loans.

To rehabilitate your loans, contact the company that holds your loan. They will work with you to set up a payment plan. You may need to show proof of your income in order to get a lower payment. You need to make nine voluntary, on-time payments over 10 months, and then your loan will no longer be in default.

You can also get a Direct Consolidation Loan. With a Direct Consolidation Loan, your default will stay on your credit report until it ages off, which usually takes seven years. You also must do an income-driven repayment plan unless you make three voluntary, on-time, full monthly payments before you consolidate. Once your loans are consolidated, you can receive financial aid.

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