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Do Grades Affect Student Loans?

Shelly Skandrani Updated: March 21, 2024 • 5 min read
college students graduation

Key Points:

  • Understanding federal and private student loans is key to managing higher education costs alongside work-study programs and financial aid appeals.

  • Your grades help maintain eligibility for certain types of aid and federal loans. Seek help when needed and make the most of financial support.

  • College offers opportunities for personal growth and professional development, giving you an advantage when applying for jobs later.

Like in all the greatest coming-of-age movies, we dream of the camaraderie of our college years. But can everyone afford to attend? That’s where student loans come in. 

Student loans are designed to help you cover the cost of higher education, including tuition, books, and living expenses. These loans must be paid back with interest — unlike scholarships or grants — which need not be repaid. Lucky for some. 

Student loans are a significant commitment, and your grades can affect them in various ways. So, it’s essential to understand what affects your loan amount, how to reduce it, and where to get started.

The Two Main Types of Student Loans

There are two main types to consider and understand. 

  • Private student loans: Provided by banks, credit unions, and other private lenders. They have variable interest rates and less flexible repayment options. 
  • Federal student loans: Funded by the government and offer fixed interest rates and flexible repayment plans. These loans are generally need-based.

Understanding the terms, conditions, and responsibilities associated with student loans is crucial for avoiding overwhelming debt after graduation.

Do Grades Affect Student Loans?

While grades do not necessarily affect private student loans, they can affect your federal student loan. High grades can also help you obtain a scholarship or grant, which can then reduce the size of your private loan.

But before you panic and run back to your course books, let’s dive in deeper.

Private student loans

Generally speaking, your grades do not affect private student loans. The approval of a private student loan hinges more on your credit score, debt-to-income ratio, and monthly earnings. Lenders normally only consider GPA if it is exceptionally low. Low grades can lead to dropping out of college, which might affect your ability to repay. Nonetheless, each lender has its own set of requirements.

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Federal student Loans

For most federal student loans, your grades do not directly affect your eligibility. These loans are generally need-based and do not require a credit check or a minimum GPA for initial qualification. 

However - and here’s the kicker — maintaining Satisfactory Academic Progress (SAP) is crucial for continuing eligibility. SAP standards are set by the institutions. They usually include maintaining a minimum GPA and completing a certain percentage of attempted credits. Failing to meet these standards can result in losing eligibility for further federal aid, including loans.

The Free Application for Federal Student Aid (FAFSA) should be your first step in applying for financial aid. It can open up opportunities for federal loans, Pell Grants, and even work-study programs. 

The Federal Work-Study Program

The Federal Work-Study (FWS) program is a form of financial aid provided by the US government. It helps students earn funds through part-time work to pay for education expenses. The program promotes part-time employment for undergraduate, graduate, and professional students who need financial aid. 

Besides providing financial help, the FWS program offers the opportunity to gain valuable work experience. You can develop professional skills, and make connections in their field of interest. These can become character-building opportunities that give you an advantage when applying for jobs later.

Here are a few things you should know about FWS:

  • Eligibility: Students must show financial need through the Free Application for Federal Student Aid (FAFSA). The amount of work-study aid depends on need, application timing, and the school's available funding.
  • Employment opportunities: Can be on or off campus. On-campus jobs often involve working for the school. Off-campus jobs are often with nonprofit organizations or public agencies. Some schools may have positions related to the student's field of study.
  • Earnings: Students are paid at least the federal minimum wage. The actual rate can vary depending on the job's complexity and the skills required. 
  • Work Hours: The program accommodates students' academic commitments and schedules. The number of hours worked cannot exceed the total FWS award.

Applying to this program early is crucial, as funds are limited and distributed on a first-come, first-served basis. The financial aid office of the participating institution determines eligibility and award amounts.

How Can High Grades Reduce Your Student Debt?

A great way to reduce the debt you incur during your college years is to apply for scholarships and grants. These do depend on your grades — nothing is perfect.

Scholarships and grants can reduce the need for student loans, or the amount borrowed. This means you’ll have less to repay once you jump into adulthood.

high grades on test

How Does Dropping Out Impact Your Student Loans?

Failing to maintain at least half-time enrollment or leaving school without completing your degree can trigger the repayment phase of your student loans. This happens regardless of your bad grades - but they're usually the reason you drop out.

This situation can lead to financial strain if you're not prepared to begin repayment. Sometimes, it can affect your job prospects, adding difficulty to an already unpleasant situation. So, actually, yes, dive into those course books.

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Regaining Lost Financial Aid Due to Low Grades

We all start higher education with the best intentions, but sometimes, life just has its challenges, and these can affect our grades.

If your financial aid has been suspended due to low grades, visit your school's financial aid office. That's a great first step. They're there to help you craft a strategy to boost your grades and get your financial aid back on track. 

Remember to inquire about the specific criteria for the financial aid you've lost. Inquire whether you can appeal the decision as well. This friendly visit can give you solutions and support you might not have considered.

Filing a financial aid appeal

You might be able to file a financial aid appeal if you've hit a rough patch academically. You can submit a financial aid or Satisfactory Academic Progress (SAP) appeal if your school permits. This is especially true if your grades dropped due to reasons beyond your control. 

Establishing a clear connection between your academic challenges and these circumstances is important. Here are some situations that are often considered valid:

  • Death of a relative
  • Severe personal injury or illness
  • Other special circumstances determined by the school

You could get your financial aid back if you show that your grade dip is directly linked to any of these scenarios. Take a peek at your college's website for more details on how to submit a SAP appeal. It could be your ticket to turning things around.

The Bottom Line

Student loans are pivotal in making higher education accessible to many candidates. They enable students to immerse themselves in the college experience - from late-night study sessions to unforgettable friendships. Yet, with the responsibility of loans comes the need for savvy financial planning and academic diligence.

Federal and private student loans offer unique benefits and considerations. They range from need-based aid to credit-based qualifications. While grades might not always impact your loan eligibility, they influence financial aid prospects through mechanisms like Satisfactory Academic Progress (SAP) standards and scholarship opportunities.

For those unable to score scholarships or financial aid, private loans could be an excellent solution — opening the doors to campus life adventure.

Ultimately, the journey through college is about more than just making ends meet. Higher education is about growing, learning, and paving the way for a bright future. 



Can I still go to college if I don't get scholarships or financial aid?

Yes. Private loans are an excellent option for those without scholarships or financial aid.

Do my grades affect my eligibility for student loans?

In some cases, yes. Federal student loans generally require maintaining satisfactory academic progress. Private loans may focus more on your credit score and debt-to-income ratio. However, good grades can open up more scholarship and grant opportunities.

What is the Federal Work-Study program?

The Federal Work-Study (FWS) program offers part-time jobs for undergraduate and graduate students with financial needs.

How can I make the most of my college experience?

Engage in academic and extracurricular activities. Join clubs, participate in internships, and explore work opportunities to enrich your college journey and personal growth.

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