If you have student debt and are considering leaving school, you’re probably wondering what happens to your student loans if you drop out. Ultimately, you’re still responsible for all the student loan debt you incurred — so it’s crucial to know what to do next. Read on to learn about exit counseling, grace periods, and how to pay off your loans if you drop out.
If you received federal student loans but don’t plan on returning to school, you have a 120-day window to cancel a loan disbursement before you’re liable for the money.
Students worried about what happens to their loans when they drop out should first go through exit counseling, which is required when a student who received federal loans graduates or leaves school.
During exit counseling, you learn about repayment options, such as deferment and forbearance. You’ll be reminded about your six-month grace period if you have direct subsidized or unsubsidized loans.
Your grace period begins the day after you stop attending school at least half time. After your grace period ends, you’re required to start making payments on your federal student loans. Unless your loan is subsidized, your interest will grow during that grace period, inflating your balance from the time you drop out.
One option is to begin making interest-only payments during your grace period. These payments will be minimal, but making them as you go rather than waiting can reduce the overall amount of money you’re paying.
You may be rightfully worried about your student loans if you drop out, especially if you do so without exit counseling. Contact your student loan servicer and ask what repayment options are available to you.
If you do drop out of college, you have several options for paying off your student loans. While your debt burden may feel crushing, there are ways to make it manageable depending on your situation.
One way to handle student loan debt if you drop out is to go back part time.
In many programs, part time is considered six to eight hours of schoolwork — the equivalent of two or three classes per semester. By going to school part time, your student loans will go into deferment and you can still work.
If you work during the day and go to class at night, it will allow you to make money and possibly prevent you from having to take out more student loans. At the same time, the payments on your current student loan balance will not be due until you graduate.
The bonus, of course, is that when you do graduate, you’ll likely be more employable thanks to that college degree. Ideally, you’ll be making more money than you were before. This, in turn, will make it easier to pay your student loan bill each month.
If you know that college isn’t right for you, you can also consider going to trade school. Your student loans may still be deferred while you’re in school, and you can learn a skill that can lead you to a career where you make more money. This is a great option for those looking to increase their income without going back to a traditional university.
Look into a longer repayment plan
When it comes to your student loan payments, there are numerous repayment options. You don’t have to have a 10-year repayment plan with high monthly bills. Instead, if you have student loans when you drop out, you can call your student loan servicer and ask if you qualify for other repayment options that will lower your bill.
One of your options is income-driven repayment, where your bill would be a portion of your income. Call your student loan servicer to see if you qualify. If you don’t and are having trouble paying your bills, ask about forbearance until you can get back on your feet.
Explore student loan refinancing
If you have federal student loans and you’re dropping out of school, you could think about refinancing your loans. When you refinance, you can simplify your debt by consolidating multiple loans into one. You could possibly lower your interest rate or get a shorter payment term.
Students dropping out of school should be wary about refinancing, though. Doing so makes you ineligible for advantages such as income-driven repayment, forgiveness programs and potential loan cancellation.
If you’re struggling to pay your federal student loans, a better path may be to contact your loan servicer prepared with information and questions about different programs for which you may be eligible.
While some private lenders require that you’ve earned your degree, there are some that will refinance your student loans if you didn’t graduate. If you can find a lender such as Citizens Bank that may refinance your private student loans for an uncompleted degree, refinancing may be a good offer.
If a lender is offering you a lower APR than what you’re already paying, you could conceivably save money over the life of your loan, especially if you don’t extend the term. Be sure to look for the APR rather than the interest rate, since the APR accounts for both the interest rate and any other fees.
Before signing any paperwork, make it a point to read and understand your entire loan agreement. You don’t want to find out about any surprise fees or other additional costs that could eat into the savings you were otherwise getting from the lower APR.
Sometimes people drop out of college because they have other responsibilities that are more important, such as taking care of family members or working. Others simply learn college isn’t right for them. Many more can’t afford it.
Quitting school is a difficult decision, especially if you have student loan debt, but you shouldn’t panic because of student loans after you drop out. There are numerous repayment options available to you. If you decide to return to college or trade school, you can buy yourself more time to pay off your debt.
If that’s not an option, look into your options for repayment plans to find one that fits your budget.
Rebecca Safier and Cat Alford contributed to this article.
Interested in refinancing student loans?Here are the top 9 lenders of 2022!
|Lender||Variable APR||Eligible Degrees|
|2.49% – 11.72%1||Undergrad & Graduate|
|2.50% – 6.30%2||Undergrad & Graduate|
|4.13% – 7.39%3||Undergrad & Graduate|
|2.49% – 7.99%4||Undergrad & Graduate|
|2.49% – 7.99%5||Undergrad & Graduate|
|3.24% – 8.24%6||Undergrad & Graduate|
|2.48% – 7.98%||Undergrad |
|1.74% – 7.99%7||Undergrad & Graduate|
|3.69% – 9.92%8||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of September 6, 2022.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $9 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of April 29, 2021. Information and rates are subject to change without notice.
3 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of 5 years and is reserved for applicants with FICO scores of at least 810.
As of 09/09/2022 student loan refinancing rates range from 4.13% APR – 7.39% Variable APR with AutoPay and 2.99% APR – 9.93% Fixed APR with AutoPay.
4 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.
You can choose between fixed and variable rates. Fixed interest rates are 3.99% – 8.74% APR (3.74% – 8.49% APR with Auto Pay discount). Starting variable interest rates are 2.74% APR to 8.24% APR (2.49% – 7.99% APR with Auto Pay discount). Variable rates are based on an index, the 30-day Average Secured Overnight Financing Rate (SOFR) plus a margin. Variable rates are reset monthly based on the fluctuation of the index. We do not currently offer variable rate loans in AK, CO, CT, HI, IL, KY, MA, MN, MS, NH, OH, OK, SC, TN, TX, and VA.
5 Important Disclosures for Navient.
6 Important Disclosures for SoFi.
Fixed rates range from 3.99% APR to 8.24% APR with a 0.25% autopay discount. Variable rates from 3.24% APR to 8.24% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.
7 Important Disclosures for Purefy.
Purefy Student Loan Refinancing Rate and Terms Disclosure: Annual Percentage Rates (APR) ranges and examples are based on information provided to Purefy by lenders participating in Purefy’s rate comparison platform. For student loan refinancing, the participating lenders offer fixed rates ranging from 2.73% – 7.99% APR, and variable rates ranging from 1.74% – 7.99% APR. The maximum variable rate is 25.00%. Your interest rate will be based on the lender’s requirements. In most cases, lenders determine the interest rates based on your credit score, degree type and other credit and financial criteria. Only borrowers with excellent credit and meeting other lender criteria will qualify for the lowest rate available. Rates and terms are subject to change at any time without notice. Terms and conditions apply.
8 Important Disclosures for Citizens.
Education Refinance Loan Rate Disclosure: Variable interest rates range from 3.69%-9.92% (3.69%-9.92% APR). Fixed interest rates range from 4.49%-10.11% (4.49%-10.11% APR).
Undergraduate Rate Disclosure: Variable interest rates range from 6.39%- 9.60% (6.39% – 9.60% APR). Fixed interest rates range from 6.58% – 9.79% (6.58% – 9.79% APR).
Graduate Rate Disclosure: Variable interest rates range from 3.69% – 9.16% (3.69% – 9.16% APR). Fixed interest rates range from 4.49% – 9.35% (4.49% – 9.35% APR).
Education Refinance Loan for Parents Rate Disclosure: Variable interest rates range from 3.69%- 9.09% (3.69%- 9.09% APR). Fixed interest rates range from 4.49% – 9.28% (4.49% – 9.28% APR).
Medical Residency Refinance Loan Rate Disclosure: Variable interest rates range from 3.69% – 9.16% (3.69% – 9.16% APR). Fixed interest rates range from 4.49% – 9.35% (4.49% – 9.35% APR).