How Do Bad Grades Affect Financial Aid?

Written by: Kristyn Pilgrim
Updated: 9/04/20

If you’re struggling in school, you’re not alone. Many students before you have also struggled. But if you’re receiving financial aid, you might additionally wonder how your academic progress will impact your bottom line. In this article, we outline all of the ways in which earning bad grades in college can affect your financial aid.

Types of Financial Aid

To fully understand what effects bad grades might have on your financial aid, it is important to understand the different types of aid since they each might be affected differently.

The primary types of financial aid include:

  • Federal, state, or school-level grants: This is “free money” given to you by the college or government to help pay for school. At the state and school level, it can be merit-based or need-based.
  • Federal student loans: These are loans taken out from the U.S. Department of Education that you are meant to pay back after you graduate.
  • Work-study: This is a type of federal financial aid that allows you to pay for some of your school by working a part-time job.
  • Scholarships or grants earned externally: This includes any scholarships or grants that you applied for independent of your regular financial aid package.
  • Private student loans: These are loans taken out through private companies to pay for your education.

Satisfactory Academic Progress

What determines if you can keep getting federal financial aid is whether you are making satisfactory academic progress toward your degree. This also often determines whether you can continue to receive state or school funding.

Satisfactory academic progress is generally defined as:

  • Maintaining at least a 2.0 GPA (C average)
  • Earning at least 67% of credits that you attempted (meaning you can’t fail more than a third of your classes)
  • Not exceeding 150% of the courses needed to complete your degree

So, your grades don’t need to be perfect. You could theoretically earn an A, C, and F each term and still be considered on track. If you are in graduate school, however, the minimum GPA tends to be higher – usually 3.0, which corresponds to a B average.

Warning Period or Academic Probation

If you fail to meet the minimum requirements for making satisfactory academic progress, the first thing that happens is a warning period or a form of academic probation. This usually lasts a quarter or semester, and you will still receive your financial aid during that time.  

If you do not improve your grades or pass rate by the end of this term, however, then your federal, and likely state- and school-level aid as well, will be terminated. Even if you do make satisfactory progress by the end of the probation period, there might be a delay in your aid the following term, as your eligibility is determined based on your final grades.

Some schools may require you to have special meetings or attend training about your academic progress during this probation period to make sure you fully understand the situation and are able to create a plan for getting back on track.

Losing Your Financial Aid

If you fail to turn things around after the warning period, your financial aid will be terminated. This can be a devastating blow, especially if you have no other way to pay for your schooling.

Depending on the school, you may or may not be allowed to continue at all. Some schools require you to maintain your grades to maintain enrollment, while others do not. Either way, you now have to pay out of pocket if you want to continue your education.

Even if you leave the school you failed out of and try to attend a different school, your federal aid suspension will follow you. 

How to Appeal Financial Aid Suspension

Sometimes, life throws you curveballs, and the reason you failed to make satisfactory academic progress was due to extenuating circumstances. Perhaps, it was a personal health issue or a family tragedy – whatever it was, you may have had the best intentions to complete your schooling, but things fell apart, and you weren’t able to make the grade.

If this is the case, check with your school’s financial aid office. They will be able to direct you to what forms you need to fill out to appeal your financial aid suspension. This safety net is in place so that students who encounter academic hard times through no fault of their own can still receive aid. It is assumed that once your extenuating circumstance is resolved, you will again perform well at school and stay on track.

How to Regain Financial Aid

The only way to get your financial aid back beside an approved appeal is to make satisfactory academic progress. You can’t drop out of school for a while and then come back with a clean slate. You’re going to need to pay out of pocket as you bring your grades back up before you can get your aid back.

If you do switch schools, however, sometimes the new school may offer aid of its own, so even if you aren’t able to get federal aid at first, you may still have other assistance with paying. This is usually considered on a case-by-case basis and depends greatly on your circumstances and the school’s policies.  

Will I Have to Pay Back My Financial Aid?

Financial aid is great because it allows you to afford what is often a very large price tag that comes with higher education. So, if you fail, drop out, or lose your aid, you might wonder whether you will be made to pay it all back.

When it comes to loans, those have to be repaid anyway. If you lose your financial aid, loans have to be repaid anyway. If you leave school, you will have a six-month grace period on your federal loans before repayment begins. The terms might be different for private loans.

If you receive federal or state grants, there is a possibility you might have to repay some of them. Usually, even if you earn all F’s, as long as you stayed in school and still attended at least 60% of your classes, you will not have to repay any of these. If, however, you drop out or stop attending, you could be responsible for repaying a prorated amount. 

Note that most schools have drop deadlines that allow you to drop classes without penalty as long as you do it early. You will not have to pay tuition, and you will not receive aid. If you wait too long to drop, you still owe tuition, and grant funds will have been dispersed to pay for it, and you may end up on the hook for some of those funds.

Other Scholarships and Grants

Free money in the form of scholarships and grants often comes with certain stipulations. If a scholarship is merit-based, there could be a much higher GPA and pass rate requirements. Dropping below these requirements may result in discontinuation of the scholarship money in subsequent terms but usually does not require repayment.

Again, however, if you drop out part way through a term after the funds have been dispersed and tuition is not being refunded, you could be required to pay back these scholarship funds. Some such scholarships may allow for a probation period in the same way federal financial aid does to give you a chance to get back on track.

Even need-based grants and scholarships often have minimum GPA and other requirements that you must meet. Always make sure you are aware of the stipulations for any scholarships or grants you receive so that you can plan accordingly.

Private Student Loans

The rules often differ significantly when it comes to private student loans. These loans are usually granted based on your finances and credit history, and the lender may not care about your grades. After all, as long as you intend on repaying the loans, it doesn’t necessarily affect them.

Make sure you check, though, because policies may differ from lender to lender. In fact, some lenders might even offer interest rate reductions if you keep your grades up high enough. 

Paying for College

We want you to feel confident that you have all the knowledge and tools you need as you prepare to pay for college. At, we provide you with all the data and the latest information so that you can make informed financial decisions as you plan for your education.