I've never herd of it happening, however anything is possible. At most, the graduate school will grant you provisional admission given that you have an excellent GPA during your first couple of semesters.
If you want a PhD, go for it. If your GRE scores are high enough they will not care much about your undergrad GPA, especially if undergrad was a long time ago. If you apply for a PhD you are more likely to get an offer for funding. Masters students get nothing.
Hockeyguy109, unless you have borrowed the limits that the government has on borrowing for school you should be fine. However, you really should look for TA or GA opportunities. If all else fails, try to become an employee of the school and you can have some tuition reduction benefits.
I talked with someone at EPA. If you have not heard anything yet, more than likely, you will receive a rejection letter. They have notified all of the awardees and if they choose not to accept then there is a chance of someone receiving an offer later. Otherwise, the entire process is over.
I have to admit, I've been stalking this forum from its inception. I'm on the East Coast, applied to the dreaded B2 (Global Change). Went to mailbox today, had no mail from EPA, "praise dance". Hoping to keep with this trend. The waiting is nerve wrecking though. I'm sorry for those that received rejection letters already.