What happens if my child doesn't graduate in 4 years?
Graduating in the “standard 4 years” from college is not as standard as you might think. According to the most recent statistics from the National Center for Education Statistics, only 41% of students graduate from a 4-year college/university within that 4 years timeframe. So, if this standard time frame is less standard than you might think, your next question might be, “How would graduating in 5 or 6 years impact your child’s financial aid?”
Federal Financial Aid:
Recap of types of federal loans - There are two types of low interest rate federal student loans. Subsidized (Interest does not accrue on the loan while the child is in school) and unsubsidized (interest does accrue on the loan while the child is in school). Subsidized student loans are offered to families that demonstrate a financial need, while unsubsidized loans are available regardless of income levels. In addition, Parent PLUS loans are less favorable loans often taken out by parents at higher interest rates that allow for higher loan amounts than unsubsidized and subsidized student loans. (For more info, check out my recent blog for the differences between student loan types.)
Will my child be able to take out federal student loans for years 5 and 6 if they don’t graduate in 4 years? For students with unsubsidized loans or Parent PLUS loans, there is no cap on the timeframe to be eligible for these loans. Your student could take 8 years to graduate and they would still be eligible for the loans in the 7th and 8th year. For students with subsidized federal loans your “maximum eligibility limit” is 150% of the published length of your program, or 6 years for a student in a 4-year program.
Institutional Financial Aid:
There is no blanket statement here, as colleges and universities have different policies for how they approach aid to students not graduating on time for their school. However, what we have found is that schools tend to lean on the side of not offering financial aid to students who do not complete their degree in the allotted amount of time. Common exemptions typically are only for students with unexpected medical complications that may force them to graduate in more than 4 years.
For students receiving a major discount on tuition as a result of scholarships, it can be critical to plan ahead to ensure graduating on time. Otherwise, for a student attending a $70,000 cost of attendance school for $40,000 due to a $30,000 academic scholarship, it is likely that the scholarship will not carry over for year 5 if the student does not graduate on time.
As you can see, this is an important conversation to have with your child if they are considering changing majors / transferring or other items that may affect their ability to graduate in 4 years. Planning ahead, there may be alternatives for your situation that can help to make sure you won’t be stuck with a large bill should your child need more than 4 years to graduate.
For questions about your personal situation, feel free to reach out, I’m happy to help.
All the best,
Andrew Holmes, Certified College Planning Specialist™
Financial Planning Solutions, LLC (FPS) is a Registered Investment Advisor. Financial Planning Solutions, LLC (FPS) provides this blog for informational and educational purposes only. Nothing in this blog should be considered investment, tax, or legal advice. FPS only renders personalized advice to each client. Information herein includes opinions and source information that is believed to be reliable. However, such information may not be independently verified by FPS. Please see important disclosures link at the bottom of this page.
SourcesNational Center for Education Statistics, Indicator 23, Postsecondary Graduation Rates – Feb 2019