What to Do When Dropping Out of College With Student Loan Debt


Thinking about cutting your losses and dropping out of college? You’re not alone.

A 2011 Harvard Graduate School of Education study found only 56 percent of students who enter four-year programs graduate within six years. For students in two-year programs, only 29 percent finish within three years.

The rest? Many spend several more years struggling towards a degree. while others simply drop out. Of course, this poses a problem for students who leave school before completing a degree — they’re still responsible for all student loan debt they incurred, but don’t have the same competitive advantage in the job market as grads.

Dropping Out of College Without Defaulting on Loans

Without steady work, students are at risk of defaulting on their loans. U.S. News reported students who quit school are four times more likely to default on their federal loans than graduates.

Default will immediately damage your credit score quite a bit, making it tough to open a credit card, qualify for a home, and access other financial tools that are only available to consumers with good credit. In other words, you want to avoid defaulting on your student loans at all costs.

Students who drop out of school and want to avoid student loan default should take the first step of going through exit counseling. Typically, when a student graduates, they are required to go through exit counseling, but many don’t.

Exit counseling is important because you learn about repayment options, such as deferment and forbearance.

Students who drop out without counseling might not know about these options and stop paying their bills when they encounter financial hardship. But the best thing to do in this situation is call your student loan servicer and ask what repayment options are available.

Instead of Quitting School, Go Back Part-Time

One way to handle student loan debt is to go back to school part-time. In many programs, part-time is considered six to nine 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 be more employable thanks to that college degree. Ideally,you’ll be making more money than you were before because of your education. 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 will still be deferred while you’re in school, and you can learn a skill that can lead you to a career where you make much more than minimum wage. This is a great option for those looking to increase their income without going back to a traditional university.

Look Into Repayment Plan Options

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, you can call your student loan servicer and ask if you qualify for other repayment options that will lower your bill.

One of the most popular options is income-based repayment, where your bill can only be a certain portion of your income. Call your student loan servicer to see if you qualify, and if you don’t and are having trouble paying your bills, ask about forbearance until you can get on your feet.

Don’t Panic

Sometimes people drop out of college because they have other responsibilities that are more important, like taking care of family members or working. Others simply learn college isn’t right for them. Many more simply can’t afford it.

Quitting school is a difficult decision, especially if you have student loan debt, but you shouldn’t panic. There are numerous repayment options available to you, and if you decide to return to college or trade school, you can buy yourself more time to pay off your debt.

In sum, your life is not over because you dropped out of college. There are plenty of people without college degrees who are immensely successful. Your focus though should be to get out of debt quickly so you can spend the rest of your life focusing on the goals you want to pursue next.

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