Published in: Student Loans | Dec. 16, 2019

Will Transferring Colleges Affect My Student Loans?

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Moving schools can impact your loans. Here's what you need to know.

There are plenty of reasons why you might choose to transfer colleges midway through your studies. Maybe you want a more specialized program at a different school. Maybe you're homesick and want to study someplace closer to home. Or maybe you're starting to regret the fact that you chose a more expensive college, and are looking to trim your costs for the remainder of your studies.

Regardless of why you're transferring schools, if you have student loans in your name, you should know that they can't be transferred from one college to another. This applies whether you're talking about federal student loans or private loans. As such, there are certain steps you must take to manage your existing loans and ensure that you have the funding you need to cover your education costs upon making that switch. 

A female college student walking into a campus building.

Image source: Getty Images

Resubmitting your FAFSA

If you applied for and received federal aid for college initially, you will need to resubmit your FAFSA upon switching schools. Keep in mind that you need to submit a new FAFSA every year even if you're sticking with the same school. If you're transferring, just fill out that form and include your new school's information. 

If you're changing college midyear, you'll need to resubmit your FAFSA when you switch. But you won't have to do anything other than resubmit that form with your updated school information. You don't need to tweak your financial information, because financial aid is only granted on a yearly basis. 

That said, the amount of federal aid you actually wind up with could change when you switch schools. 

Federal aid is awarded on an annual basis. If you transfer schools midyear, any student aid already paid out to the initial college you attended counts toward that annual limit, which could impact what you're left with when you switch.

Furthermore, if your new school costs a different amount, it could alter the amount of aid you're eligible to receive. Keep in mind, too, that different schools have different amounts of aid they're able to award, so if you're counting on grant money to cover your education, you may be in for an unpleasant surprise -- or a pleasant one. You never know, but you could actually wind up with more money. 

Reapplying for private loans

If you took out private loans for college and are transferring schools, it's crucial that you inform your lender at once. You can't just take an existing loan with you from one school to another, and once you leave your former school, it could trigger your repayment period unless you let your lender know that you're enrolling in a different school immediately. In that case, you'll generally be given the option to hold off on making loan payments until after you graduate. 

Furthermore, if you want to continue borrowing funds privately to attend your new school, you'll need to submit a new private loan application. If your finances (including your credit score) haven't changed, you'll likely be eligible for a comparable amount. That's assuming you need that same amount to attend your new college. If you don't need as much money because your new school costs less, that should make the borrowing process even easier. 

Managing your existing federal loans

When you move from one school to another, it will trigger the activation of the grace period for the federal loans you took out to cover your education at your first college. The grace period for federal loans is six months from the time your studies conclude. You don't have to repay your loans during your grace period, but you're expected to start making payments as soon as that period is over. Because you're switching schools rather than graduating from college entirely, keep your loan servicer informed so that you don't wind up liable for repaying that debt prior to graduation. 

Although transferring colleges often makes sense academically, financially, and even socially, be mindful of the fact that doing so will impact your student loans, whether they're federal or private. Take the right steps, and with any luck, it'll be a smooth transition from start to finish.

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