5 Ways to Avoid Drowning in Student Loan Debt if You Drop Out of College

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You’ve read the stories about college dropouts who ended up becoming wildly successful people — you know, people like Bill Gates and Mark Zuckerberg.

All that cramming for the latest exam might have you thinking about dropping out of college yourself, and you probably aren’t the only one in your class.

Of the approximately 2 million people who start college each year in the United States, one-third have not earned a formal credential and aren’t enrolled eight years later, according to the National Student Clearinghouse Research Center.

But even if you’ve decided that a college degree is nothing more than a piece of paper, there’s the small — or not so small — matter of how much you owe.

If you took out student loans to finance your college education, dropping out could have severe financial consequences.

Borrowers who don’t complete their degree are three times more likely to default on their loans than those who graduated, according to the U.S. Department of Education.

But you’re going to be different, right? After all, that’s why you’re ditching the college classroom for the real world. Before you torch your textbooks, let’s come up with a plan.

What to Do if You Want to Drop Out of College

If you’re considering ditching the confines of higher education, you’ll have a better chance of succeeding after you drop out if you know why you want to quit.

That way, you can formulate an appropriate plan for taking care of student loans so you don’t end up spending the next decade paying off debt for a degree you didn’t get.

1. If You’re Failing Classes

If you’re failing one class, you might need a tutor. If you’re failing every class, it may be tempting to drop out altogether.

But if the transition from high school to a four-year college was more difficult than anticipated, consider transferring to a community college — also known as a reverse transfer.

Why bother transferring instead of dropping out? By continuing your education as a full-time or at least half-time student, lenders will typically allow you to defer your student loans.

Pro Tip

You could save $224 per credit hour by going to a community college instead of a four-year school, according to a Penny Hoarder analysis of National Center for Education statistics.

That’s important because during deferment, you don’t need to start paying back your student loans right away — and if you have subsidized federal student loans, the U.S. Department of Education will cover the accruing interest during deferment.

By transferring to a community college, you can get more personalized attention in your college courses, which could help you finish with an associate’s degree. And if you’re feeling more prepared at that point, you can always head back to a four-year college to complete your bachelor’s degree.

2. If You’re Out of Money

If you’re struggling to pay your bills while you’re in college, you may think you’re better off quitting now and making money out in the real world.

That could be a short-term solution with long-term financial consequences.

Those with a bachelor’s degree earned an estimated $17,774 more per year than those who had some college or an associate’s degree in 2018. And over a 40-year career, those who had some college earned $721,000 less than those with a bachelor’s degree, according to the Georgetown University Center on Education and the Workforce.

So before you decide college really is worth it, assess your financial situation — here’s our cheat sheet for creating a college budget.

Taking a hard look at where the money is going could show you how you could stay in school. And remember the other half of the money in-and-out equation — check out these flexible ways to make money while you’re in college.

Looking for a way to make more money? You could work from home. We post new job opportunities every weekday.

Don’t be afraid to reach out to the financial aid office, either. Although funds are typically distributed before the school year begins, there are students who decline or lose their financial aid award during the academic year, which could free up money for those who ask.

Given the unique circumstances of 2020, you can also check out these additional options for financing college this year.

And after all that, if you’re still coming up short, consider switching to half-time status and getting a part-time or full-time job to make additional money without taking on additional student debt. By maintaining half-time status, you can continue deferring your student loans.

3. If You’re Not Learning What You Need for Your Career Goals

Your first year of college may involve a lot of coursework you don’t think is related to your major. The truth is that developing a solid foundation is considered part of the college experience.

However, if you’re well into a program and you don’t think that you are developing the skill set you need for your career goals, it may be time to look outside the campus quad.

Trade schools can offer specific training for occupations like welding or massage therapy. You could complete a certificate program in less time than it would take to earn a bachelor’s degree.

If you still value your college education but want to get real-life work experience, consider applying for an internship. It’s a great way to gain hands-on, practical skills and experience in your field of study — here are some tips for how to get an internship.

Pro Tip

Ready to apply for an internship but need a little help putting together your resume to highlight your achievements? Check out this guide for how to write a resume.

And if you want more specialized training but also need money to pay back student loans, consider applying for an apprenticeship program within your field.

Previously used almost exclusively by building trades in the United States, apprenticeships now offer an entrance into tech and healthcare industries that face a shortage of skilled workers.

That earn-as-you-learn model can help you pay off student loans while concentrating on your field of interest.

4. If You Have a Job Opportunity

Congratulations! Although a job offer sounds like the ticket out college you’ve been dreaming of, understand that once you leave school, it’s unlikely you’ll return.

Of the 29 million former college students who left school in 2013, only 13% returned to postsecondary education as of 2019.

If the job offer is too far away to continue your education on campus, ask your admissions office about online courses that you could take to finish college and earn your degree. Particularly given the current circumstances, more colleges are offering online classes.

If finishing the degree isn’t an option, you’ll need to find out how much you owe in student loans and set up a repayment plan before you drop out. Contact your college adviser and the  financial aid office to determine what steps you need to take.

5. If You Hate College

If it’s your freshman year and you’re feeling homesick, that’s fairly common and there’s a good chance you’ll feel more at home after giving yourself a few weeks to adjust.

But if you’re in your senior year and you’re only a couple credits away from graduation, suck it up and finish the degree — finishing that last semester and getting your bachelor’s degree is worth the aggravation. Even if it’s online.

However, if you truly feel that college is not a good fit for you, it is possible to withdraw. Contact the financial aid office to find out if you’re eligible for a refund — every college generally has its own refund policy.

Pro Tip

If you can’t repay your federal student loans due to a temporary financial hardship, you can apply for deferment or forbearance, which allows you to reduce or postpone payments for a period of time.

A word of warning: Do not simply stop attending classes or take a gap year without contacting your financial aid office and your academic advisor. Some institutions will allow you to re-enroll after a leave of absence, but you may have to go through the enrollment process again.

But regardless of why you leave, as soon as you quit school, the deferment clock and your six-month grace period begins, after which point you’ll begin owing on your student loans.

You have a little more time due to the pandemic if you have federally held student loans. The U.S. government’s $2.2 trillion coronavirus rescue package covered a forbearance period that has been extended through Aug. 29, 2023. Benefits include a suspension of payments and 0% interest.

Regardless, make sure you enroll in an income-driven repayment if your income won’t cover the monthly payments for your student loans under the standard repayment plan.

We have seven jobs that don’t require a college degree so you can start making money to pay back those loans sooner rather than later.

Being a college graduate isn’t a requirement for getting the life you want, but having a plan for what to do if you want to drop out can certainly help put you on the road to financial success.

Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.