How to Handle Your Student Loans If You Need to Take Time Off School

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College doesn’t stop for anyone, even if you have an emergency. But what about your financial aid?

If you need to take time off school, here’s what could happen to your funds.

How taking time off school affects your financial aid

While enrolled in school, you’ll complete the FAFSA each year to access funding. The FAFSA helps your school decide how much financial aid — from scholarships and grants to loans — you’ll get for the year.

Circumstances can change your college trajectory, though. You might need to take time off school for a few reasons, such as to manage a family emergency or stress or so you can work more to pay your bills.

Whether you’re taking off a semester or an entire year, you don’t need to pay for classes you didn’t sign up for, said Jay Murray, president of Solutions for Tuition, a college cost assistance company.

“If you weren’t enrolled in school, then you didn’t borrow any money for that year,” he said. “You will, however, be required to begin making payments on your existing federal student loans six months after leaving school, regardless of whether you graduated, withdrew, or dropped out.”

What happens to my student loans?

While some federal student loans are considered part of your financial aid package, not all loans are handled the same way when you take time off.

If you take a semester off, it shouldn’t make much of a difference for your federal loans. Most federal loans have a six-month grace period. When you return to school at least half time after taking a semester off, the grace period on your loans will reset, provided you didn’t exceed it.

Some private student loans also have a grace period, but it depends on your terms, lender, and enrollment situation. Talk to your school or lender about your options if you have private student loans.

“You only pay back what you borrow,” said Joseph Inskeep, a financial adviser for Advanced Wealth Strategies Group, a Texas-based financial planning firm. “If you didn’t borrow any money during the year you were off or were supposed to be enrolled, then you will not have accrued any extra loans for that semester, just interest accrual.”

In this case, interest accrues only on private loans and unsubsidized federal loans.

What happens to my scholarships and grants?

Scholarships and grants are a bit different than loans. Murray said taking time off school hurts your chances of keeping scholarships when you return.

“Students who were awarded a merit scholarship are at [the] greatest risk,” he said. “When students take time off school, they violate the satisfactory academic progress requirement and may forfeit their scholarship for all remaining years, even when returning to school.”

Many private scholarships and grants don’t take a one-size-fits-all approach. Some do require you to maintain a minimum number of course hours each semester, and you could lose aid if you drop below full- or part-time enrollment.

If you’ve received scholarships and grants, talk to your issuers about what will happen to your awards if you take time away from school. You should also inquire about grace periods.

Since everyone’s situation is unique, talk to your school’s financial aid office or college adviser about what will happen to your grants and scholarships once you return to class. Your college might have different standards for receiving aid based on your enrollment.

Where to look for repayment help

If you take longer than a semester off school or have loans that require payments while you’re still a student, you might need help staying current on your debt. Here’s what to do, depending on which types of loans you have.

Federal student loans

Your enrollment status could affect your repayment. If you have federal student loans, you could qualify for deferment or forbearance. Deferring your loans pauses your payments for up to three years, while forbearance pauses your payments for up to 12 months.

Depending on your loan type and lender, you could defer student loans interest-free during that time. If you’re currently enrolled or you’re planning to return to school, deferment could help you avoid making payments until you graduate. If you have unsubsidized loans, however, interest will continue to accrue during deferment.

Private student loans

With private lenders, you aren’t entitled to any sort of financial relief. Some private student loans do offer deferment and forbearance options, depending on your loan type, terms, and the lender. But it’s not common.

Federal student loans are more flexible when it comes to repayment terms. Private student loans are stricter. There’s no universal standard for private student loan forgiveness since each lender operates on its own terms.

If you’re having trouble with your private student loans while you’re taking time away from school, contact your lender about your struggles. It might seem tempting to simply not pay your loan back if you can’t afford it, but dodging payments will hurt your credit score.

Know your options if you have to take a break from school

Regardless of why you need to take time away from school, remember that everyone’s financial situation is unique. If you need to be away from classes for a semester or more, talk to your school’s financial aid office about your student aid to understand what you’re responsible for while you’re away.

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.