Student loans, which come from the federal government, private lenders, and colleges and universities, help many students pay for their educations. However, unlike scholarships and grants, loans require repayment after graduation. Students who leave college early or fail individual classes are still responsible for repaying some or all of the money they borrow.
Students who receive loans must sign loan agreements with the lenders. These agreements are legally binding documents that spell out the terms of repayment, along with other information such as how the lender will distribute the funds. Loan agreements sometimes include entrance counseling, which requires students to read and understand basic loan provisions, including the need to repay loans even in cases of course failure or early withdrawal.
Failure and Withdrawal
Some lenders allow student borrowers to pay back only a portion of their loans if the student leaves college early and receives a partial tuition refund. These provisions are based on strict timelines that specify when a student must withdraw in order to receive a partial credit. Students who anticipate failing one or more classes, or who leave college for personal reasons, will still be liable for repaying their loans in full if they fail or withdraw after the lender's deadline, even if they don't receive course credit or expected degrees.
The reasoning behind requiring students to pay back loans for failed classes has to do with the way colleges and universities charge tuition. Tuition covers the cost of facilities, administration and instructors' salaries. These costs exist regardless of student performance. In addition, many schools charge student fees for materials, such as a technology fee for access to computer labs. Full-time students often use loans to help cover the cost of room and board, textbooks and travel. This makes loan forgiveness due to course failure illogical and impractical.
Students who fail classes enter loan repayment according to the same terms and schedules as students who pass or receive degrees. Some loans offer grace periods, allowing students to seek employment for several months after graduation. Others have options for deferral when students aren't able to afford loan payments. Students who fail to attain degrees may not be eligible for the jobs they expected to earn, which can mean a reduced income. Income-based repayment plans allow students to make monthly loan payments based on what they earn, allowing them to meet loan obligations despite the consequences of failing classes.