About 40% of your college classmates might never graduate.
According to the National Center of Education Statistics, only around 6 out of 10 undergrads have degrees six years after starting college (62% for women and 57% for men). And what makes this especially troubling is that repaying student loan debt is hard enough even while holding a degree — Without one, well, it becomes even more difficult.
If you’re considering dropping out before earning a diploma, make sure you first understand how it’ll affect your finances.
3 financial reasons not to drop out of college
Perhaps you have a list of reasons why it would be wise to leave school. That’s entirely possible, and certainly every student’s situation is unique.
But even if you think you’re better off leaving campus, first consider the financial effects of your decision.
1. You might have to repay grant and scholarship awards
If you’re wondering how to drop out of college with financial aid — and not have to pay that aid back — there are some facts to keep in mind.
Under some scenarios, you’d have to repay federal grant money, including if you withdraw from classes that were subsidized by the grant. For example, if you received a Pell Grant for your sophomore year but left before 60% of your semester or term elapsed, you would need to return the unused portion of your grant award.
When you talk to your school about withdrawing — and tuition-refund deadlines — ask if any of your gift aid will need to be repaid. For federal grants, you might have as little as 45 days to pay back your school or agree to a repayment arrangement.
There are similar consequences for grants awarded by your state. Falling below half-time enrollment — or dropping out altogether — could force you to repay your unused grant amount.
Similarly, merit-based grants and scholarships could be at risk if you drop out, as they sometimes require maintaining academic success, such as a certain grade point average. This aid wouldn’t be waiting for you if you decided to re-enroll at a later date.
Scholarships awarded by private organizations have their own rules for repayment. If you received gift aid to attend college, review the terms before deciding to drop out. You won’t want to be surprised by a bill in the mail.
2. You’ll still have to repay student loans
Leaving school might help you avoid borrowing more student loans, but it won’t wipe away the debt you’ve already accumulated.
There’s one exception for early-semester dropouts: You can cancel your federal loan — and skip the fees and accrued interest — within 120 days of your school disbursing the funds.
Although you can’t cancel a federal loan after that 120-day mark, you could apply for a deferment or forbearance if your finances are in dire straits. Just be prepared to prove it to your servicer with supporting documentation.
Otherwise, leaving school speeds up your loan repayment. You’re expected to begin making monthly payments on federal and private loans at the conclusion of your six-month grace period.
After you complete student loan exit counseling online, federal loan servicers are required to provide you with your initial payment amount and due date, as well as a schedule of payments.
In the case of private loans, you’ll need to be even more proactive. Contact your lender as soon as you’re considering dropping out, and make sure to ask about what it offers in terms of a grace period. If you get in touch soon enough, you could take your school’s tuition refund (if you qualified for one) and use it to make a large lump-sum payment toward ending your debt.
3. You’ll make it harder to find a salaried job — and afford loan repayment
Students who don’t graduate from college earn, on average, $1 million less over their lifetimes than their degree-holding peers, according to the College Scorecard. And of course, not having a diploma also limits your access to many jobs or fields that require completing your education.
That won’t come as a surprise if you’ve scanned websites like Glassdoor for salaried job listings that require either a bachelor’s degree or a given number of years of experience.
And since it’s harder to find a job without a degree, it also becomes more difficult to repay your financial aid debt.
Sure, you could reduce or pause your payments via federal loan programs like Income-Driven Repayment and economic hardship forbearance, but that only stretches out your payment, allowing more interest to accrue over time.
You can trim your budget too, but you’ll eventually run out of expenses to cut. Instead, increasing your income is the best way to pay down your debt. For instance, you could start a side hustle while you seek out a stable paycheck elsewhere.
Unfortunately, even if you’re able to find work and get your finances in shape, being degree-less still limits your options for student loan refinancing, which could lower your interest rate. For one thing, very few lenders refinance the student loan debt of borrowers without degrees. Citizens Bank is a rare example that will refinance your college debt anyway, but it also demands that you make 12 on-time payments toward your debt to gain eligibility.
Where to find advice on dropping out of college
There are plenty of people with advice on paying for college, but what about sources of wisdom when you’re readying to quit school?
You’re likely to find the most help on the very campus you’re considering leaving.
Colleges and universities generally have support centers that can help you work through any number of issues. Consult the center that specializes in your case, whether it’s related to your academics, finances or health. For instance, if you’re considering dropping out because of your money problems, your first stop should be the financial aid office.
There could be a way out of your predicament, whatever ails you. If you’re a student-parent trying to find time to attend class, for example, you may be relieved to learn about grants for child care. If you’re an entrepreneur who doesn’t see much use to staying in school, keep in mind that college is a great place to start your business.
Although dropping out might seem like the answer, be open to solutions that keep you in school part- or full-time and on track to graduate.
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