How Do I Pay for School If I Transfer?

College Transfer Article

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It’s a hard question to answer mostly because everyone’s situation is unique. There are a number of things you can do to prepare for discrepancies in price, and that begins by understanding exactly what you’re paying now and how. 

To set the right expectations, though, every college and university has different policies on financial aid, different capabilities to award financial aid, and different things they award financial aid for. 

Confusing? Yes. True? Also yes. 

You’ll feel like there are a lot of moving pieces to this puzzle, especially if you utilized all of your available resources to finance your schooling—aid from the college, governmental aid, individual scholarships, and private loans. It’s okay, though. If you can get organized, we can make this as easy as possible. 

One thing to think about, though, is that students transferring mid-year may experience a more difficult time receiving college and federal funding. Depending on the available funds left at the college, they may be unable to offer you the merit aid you deserve. Also, depending on what state you reside in, they may have worked through all of their allotted financial aid for the year. 

It may work out that you don’t encounter these issues and, for real, fingers crossed, but it’s a reality that you’ll want to consider. Don’t be afraid to ask colleges you’re intending to transfer to if you’d be offered more financial aid if you switched your start date to the fall.

Make an appointment with the Financial Aid office at your current school.

The financial aid office at your current college should easily be able to tell you several important things all at once, so it’s a great place to start especially if your primary worry is regarding the financial aspect of transferring institutions. 

If the college or university is providing you with a scholarship or merit aid, how much is it exactly? How much does it offset the overall tuition for the institution? If your current college is giving you a hefty sum of money, you’ll definitely want to assure your new college or university can at least come close to offering a similar amount of support. 

If there’s a big difference between the tuition at your current school versus the school you’ll be transferring to, it may be easier to understand these things in percentages. For example, if your tuition is $26,000 per year and the school awarded you $10,000 in merit aid, the schools itself is paying for 38% of your tuition. 

Just because your new school is also offering $10,000 in merit aid, doesn’t mean that it’s equal in value to your current school if the tuition is more like $39,000. In this scenario, they’d only be covering 25% of your tuition. 

The big thing right now is just to know the numbers—create a Google Drive Spreadsheet, an Excel sheet, however you want to keep track of things, and just make sure that you know the numbers

Contact any scholarship providers, if needed

If you worked hard to assure that you didn’t have to take any or many loans out, you want to make sure that any scholarships you earned are going to follow you to your new institution, especially if they’re renewable for multiple semesters or years. 

Send a quick email to your scholarship providers to hammer out what you would need to do if you decide to transfer. Get exact dollar amounts and save any forms you may need to fill out to renew or request the funds be sent to a different institution. 

They may request you provide them with an acceptance letter to the new institution, so the official switchover may have to wait until you receive that, but at least you’re ready when the time comes! 

Federal Financial Aid (FAFSA)

If you have subsidized or unsubsidized loans from the government, grants, or other forms of federal aid, you’ll have to take a few actions to ensure your aid makes its way to your new school—especially if you’re transferring mid-year. 

Unfortunately, there’s a rather complicated equation to understanding the usage of federal financial aid when transferring schools mid-year—each student is only eligible for so much money and since tuition, opportunity, and more are likely to change when moving schools, it gets even more complicated. 

Called R2T4, the formula takes into consideration things like cost of attendance gaps (tuition changes), the colleges refund policy, and return of student aid funds to the government, to calculate the amount of financial aid available that can go towards your new school for the year. Unfortunately, this can sometimes wind up with you owing money to your current school, and they can do things like withhold your transcripts if there are unpaid bills on your account. 

You’ll really want to have an open line of communication with someone in the financial aid office at your current school to make sure that you’ve calculated everything out correctly. 

Moving between your freshman/sophomore or sophomore/junior years is easier by comparison. When you fill out your FAFSA for the upcoming year, you’ll add the school code to your list, giving them access to your information. There won’t be any complicated R2T4 calculation because you’re starting with a clean slate on your financial aid usage for the year. As always, apply for financial aid as soon as absolutely possible. The FAFSA is available on October 1st and don’t hesitate to immediately fill it out, especially if you’re in a first-come-first-serve state. 

While that’s certainly something to take into consideration, if your gut is telling you to leave your current school ASAP and you can get it worked out, go for it. 

We do have one more thing to talk about, though, when it comes to transferring your federal financial aid loans, in particular. Grants do not need to be repaid, but if you took advantage of a low interest subsidized or unsubsidized federal student loan program, that’s a different story. 

We often think of federal student loans as being put on pause until the four years of school are up, but that’s not the case. This goes for students continuing at the same school, as well, but it’s just something we should address regardless of what your plan is. Every year you reapply, the Direct Subsidized and Unsubsidized loans enter a state of “repayment.” 

Yes, you read that correctly. It’s a special form of “repayment” called in-school deferment where you don’t have to pay monthly at this point, but it does accrue interest. That interest accrues throughout the entire time you’re completing your undergraduate degree. Remember, this is a tidbit for all students, transferring or not.  

There are two routes you can take to deal with the matter at hand. You can take the in-school deferment if you’re applicable—typically, Federal direct loans, Federal Family Education Loans (FFEL), Perkins Loans, and PLUS loans are eligible. Regardless, you’ll want to call and confirm you’re eligible, which includes requirements such as enrolling at least half time, being enrolled as a regular student, and maintaining satisfactory academic progress. You’ll likely have to fill out a form since you’re transferring schools.

With this route though, just to really drive this point home, interest will accrue on certain types of loans (such as unsubsidized loans), and it can be shocking how much it can add up. It can be especially jarring if the interest charges capitalize (which happens after 4 years of in-school deferment), which means that the interest is absorbed into the principle. 

As a fictitious example, let’s say that your principle (what you request the loan for) is $10,000 dollars and the interest rate is 5.5%. This loan was taken out in 2010. That’s a total of $2,200 dollars over four years, and we’re simplifying this because interest is actually compounded on a daily basis, so that number will likely be a certain number of cents higher. 

If there are no payments made on the loan for four years (the same four years you’re completing your undergrad), then in 2014 the loan will capitalize. When a loan capitalizes, it absorbs that $2,200 dollars of interest into the principle, and then proceeds to accrue interest on that new total, now $12,200 — still with 5.5% interest, though. Now the yearly interest paid is around $671. 

Do you see how this could come back and smack you right in the face? 

If this is all making your stomach turn, there’s another option you can pursue to mitigate costs and prevent capitalization: utilize an income-driven repayment plan. Spreading your payments over 20 or 25 years, IDR plans only charge you a certain percentage of your discretionary income. Basically, to put this plainly, if you’re making $100 dollars a month and they repayment plan caps at 10% of your income, your monthly loan payment would be $10. 

Choose carefully. Both options have their upsides and downsides (interest accruing vs. paying now), so talk to your parents, talk to a banker at your preferred bank, and figure out what’s best for you! 

Give Your Student Loan Provider a Call.

If you took out student loans to cover the remaining balance of your tuition (which, most students do), you’ll want to give your loan provider a call. This is especially important if you’re switching colleges mid-year. 

Private loans do not automatically transfer with you, so you’ll need to reapply to cover any remaining balance. Get the exact total of your loan and a breakdown of the process to keep with all of the other information. You’ll also likely have to fill out an in-school deferment form unless you opt for an income-driven repayment plan to squash as much of that accruing interest as possible. 

As always, the general-best-advice-available is to take out as little as possible in student loans. Accept all forms of federal loans first, which will typically have lower interest rates and easier-to-fulfill repayment plans. 

Final Tips

I’m not going to lie and say it’s easy or anything like that, but if you stay organized and keep open lines of communication with financial aid officers at both institutions, it becomes a whole lot less complex. 

Don’t hesitate to call, schedule appointments, or send emails to ask questions. Always be patient and ask for their patience as you try to work everything out and make sure that you understand everything top to bottom. 

Alright. Take a deep breath and start making phone calls! You can do this! 

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