A college education isn’t a short process, and there are times when people find that it’s just not the right choice for them, or that life circumstances won’t allow for the time investment. So, what can happen to your student loans if you end up leaving school before you graduate? Do you still have to pay back your student loans?
The short answer for most situations is yes. If you left a class or classes after your school’s designated time to withdraw from classes without tuition or penalty, then you’ll most likely have to pay your tuition (and, thus, your loans). The question is, how much might you owe?
Student Loans Are Debts Like Any Other
By now it’s common knowledge that student loans aren’t free money. Just like a car loan or mortgage, student loans are meant to be paid back eventually — and with interest.
But what if you stopped attending classes? Should you still have to pay? Here’s the thing — if you didn’t drop out in time to get a refund on your tuition, then you most likely still owe the tuition. And if you used loans to pay for it, then you still owe on the loans.
(As for how much you might owe, that answer can be a little bit more complicated. Different schools handle dropped classes differently — including the timeline within which you can drop without owing the money for the class and whether or not they charge additional fees. What’s more, if you drop a class or two and it puts you below full-time status, that can affect your eligibility for the financial aid you’ve already received. If you’re thinking of dropping a class or classes, it may be helpful to go to your school’s bursar’s office to see what that means for the tuition you owe, and the financial aid office to see what it means for your loans.)
Here’s another way to look at it. You can get a mortgage for a home you don’t live in, but you still have to pay the mortgage. You can get a loan for a car you choose not to drive, but you still have to pay the auto loan.
Borrowed money has to be repaid regardless of how the product it paid for was used — or not used as the case may be. This can make for an extremely difficult situation for someone who drops out of college since they’re paying for an education that wasn’t completed with a degree and thus might not be able to help them find work and higher earnings.
Now, if your school was closed while you were attending (or within 120 days of withdrawal), you might be eligible for student loan forgiveness in the form of closed school discharge. You can find out more information about whether you qualify here.
What to Do If You’re Struggling to Repay Your Loans
If you had to drop classes and you’re struggling to repay your student loans, all hope is not lost. Federal student borrowers can apply for income-driven repayment plans to lower their monthly payments. Different types of federal student loans are eligible for different types of income-driven repayment plans, and the borrower must meet the specifications of that particular program to be approved. You can find out which of these plans you might be eligible for here.
Federal student loans, and some private student loans, also offer deferment or forbearance, depending on your personal financial situation. Deferment and forbearance both temporarily pause payments on your student loans, though interest could continue to accrue during the pause. You can learn more about federal student loan deferment and forbearance here. If you have private student loans, check your lender’s website and even consider giving them a call to see what kind of options they might have.
Don’t Let Your Student Loans Go Into Default
This might seem fairly obvious, but it’s best to avoid student loan default if you can. Even though student loans aren’t tied to collateral that can be taken away from you (such as a house or car), defaulting on them will greatly hurt your credit. What’s more, student loans are extremely difficult to discharge through bankruptcy, so that may not be good a backup option for your situation if you think you might go into default.
As soon as you see yourself sliding into possible default, consider getting on the phone with your lender or servicer to discuss options specific to their student loan program that may help to keep you on track. If your loans are federal and you’re not sure who your servicer is, you can find out with this website. If your loans are private, you can see who has them by reading your credit report.
After reviewing your options, you might find that there are ways to help that you didn’t know about before. Leave no stone unturned so you can keep those student loans, and your credit, in a positive state.