Q: We are working with a youth who would like to reenroll in community college, but has incurred student debt from when he enrolled and received the Pell Grant, and then dropped out and did not pay the financial aid back. He reports that the debt has gone into collections. Will he be able to reapply for financial aid? Any advice on how to deal with the debt so he can reenroll in school?
A: If the debt he incurred was from federal financial aid such as the Pell Grant and it has gone to collections, then he will have to at least begin to make payments before being able to apply for any other federal financial aid (regardless of the school he enrolls in).
The student should call the phone number on his Student Aid Report and ask how many payments he must make before the hold can be lifted. The collections office his debt has been referred to will inform the Department of Education (DOE) if the student is making payments. The DOE can issue a letter to the student or school, and at that point the school can override the hold for the student to receive the Pell Grant again.
It is also good to know that if the student calls the collections office and indicates he would like to pay his debt in full, they will usually discount the payment amount for the student if the student asks.
For future reference, if the student was able to catch address the debt before it went to collections, he may have been able to make “satisfactory arrangements” with the school, where the school repays the debt and makes arrangements with the student for repayment. Many schools are willing to use future aid to pay off debt.