Here's something you won't hear often — or ever: "Student loans are a privilege." (I Googled it: Six results.)
Considering loans make it possible for millions of people to get a college education, they're something to be thankful for. Yes, college can be ridiculously expensive, loans often don't cover all the costs and unaffordable debt is a terrible thing to deal with, but that doesn't cancel out the good things student loans enable. Because they are fundamentally a helpful tool, students need to earn their loan privileges, and if you fall short of the lender's standards at any point, you may lose the financial aid and your ability to complete your education.
Some borrowers don't realize until it's too late they have requirements to meet in order to keep receiving loans. If you're banking on student loans to complete your education, make sure you hold up your end of the agreement. Here are a few things that could disqualify you from student loan aid.
1. Getting Bad Grades
Theoretically, grades reflect what you're getting out of your education, so poor grades send the message that you're not learning much. Think of it this way: The government has invested in your education, and your grades are an indication of the potential return on it. If it becomes clear that you may not produce one, they're not going to invest further. Your school's policy will tell you what grade point average you need to maintain in order to keep receiving financial aid.
You also need to make "satisfactory academic progress," meaning you have to be earning credit at a rate that suggests you won't be in school forever. For example, your school may say you have five years to earn a degree designed to be completed in four years, if you're a full-time student. If you fall behind that pace, you may find it hard to find someone who wants to foot the bill for you to continue.
2. Not Meeting Need Requirements
Federal student loans require students to demonstrate need for financial aid, so if your financial situation changes from year to year, you may not qualify for the same amount of loans from one academic term to the next. That's something you need to be prepared for.
If you're in repayment for student loans and want to take out another federal student loan, make sure your existing debt is in order. You can't receive additional aid if you're in default.
3. Neglecting Your Paperwork
You have to fill out the Free Application for Federal Student Aid (FAFSA) every year. It's very easy, and you will not get federal loans if you don't.
Sticking with the theme of looking at loans in a positive light, it's actually good for you that these rules are in place (again, there are arguments otherwise, but this is a glass-half-full story). If you're unable to make your way through college without accomplishing these three things, it's probably not a good idea to go further into debt for the education. There are certainly exceptions to that idea, and you're allowed to appeal your ineligibility if you fall short of expectations as a result of extenuating circumstances, but it's important to remember that student loans are a valuable tool, and you have to put forth some effort to use that tool.
As anyone can tell you, that work only continues after graduation. When you enter student loan repayment, prioritize making your payments, because falling behind will make the loans more expensive, and delinquency or default will hurt your credit standing. You can see how your student loans are impacting your credit by reviewing your credit data for free on Credit.com.
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