7 Reasons Financial Aid Can Be Taken Away

Facebook icon Twitter icon Print icon Email icon
Brian O'Connell

By Brian O'Connell

March 20, 2023

If you’re a college student with good grades, are an American citizen, have a Social Security card, and have a clean criminal record, chances are you qualify for federal student financial aid to help pay for college. But there are in fact situations where you can lose your federal college financial aid.

Federal aid for college includes federal student loans, scholarships and grants (such as the Pell Grant) and the opportunity to pursue work-study programs. The key to hanging on to all forms of federal student aid through your college years is avoiding the following scenarios.

Stay academically eligible

To avoid having your federal college aid taken away, you’ll need good grades and enough class credits to steer clear of any financial aid removal. Academically, most colleges have their own criteria for what constitutes “good grades” and academic progress. Check with your school’s admissions and/or financial aid office and ask what academic criteria they use to base federal financial aid eligibility for students. That list could include these benchmarks:

  • The grade point average you’ll need to clear each semester or academic year to receive financial aid.
  • How many academic credits you’ll require, usually on an annual basis, to stay eligible for federal financial aid
  • What kind of other issues might factor into receiving financial aid, like being suspended from school for bad behavior or having a history of incomplete classes, for example.

Always fill out the FAFSA

Additionally, you’ll need to regularly and accurately complete your Free Application for Federal Student Aid (FAFSA) on an annual basis, as long as you’re attending college and looking for federal student aid.

Doing so is simple enough. The FAFSA website also provides an application renewal form, making the process easier to complete.

Don’t default on your federal student loans

Most undergraduate colleges students won’t have to worry about student loan defaults, unless they took time off from college and, during that interim, they didn’t repay their student loans (this goes for graduate college students, too.) If, for whatever reason, you have defaulted on a federal student loan, you likely won’t continue to receive federal financial student aid.

Keep your U.S. citizenship status.

If you’re a college student who was an eligible non U.S. citizen, but lost that status, and can’t gain citizenship as a result, you’ll need to have that citizen eligibility status reinstated, or face losing federal financial student aid.

The U.S. Citizenship and Immigration Office can be a big help in getting your eligible non-citizen status squared away.

Avoid incarceration for legal offenses.

This area is murky, as they are exemptions and conditions that can be met to regain federal financial student aid. However, incarceration can lead directly to losing federal financial aid, as you’ll need to be released before you’re once again eligible for federal financial aid.

Don’t accept too much federal aid money

College students can have their federal financial aid taken away if they’ve previously accepted more money in financial aid than the government committed to. It’s not an uncommon occurrence but to regain your eligibility status, you’ll need to either pay the excess funds back in full, or make arrangements to do so (i.e., via a monthly or quarterly installment plan.)

Your school’s financial aid office can walk you through that repayment process, and can let you know if you’re at risk of losing your federal student aid benefits because of an overpayment issue.

Avoid a government lien

If the government has placed a lien on your assets, likely due to a tax issue or unpaid legal penalty, you’ll have your student aid rescinded until you either pay the debt back or make arrangements to pay the debt back.

See also: Complete Guide to Financial Aid and FAFSA

A good place to start:

See the best 529 plans, personalized for you