If the thought of cutting your losses and dropping out of college has crossed your mind, just know that you are not alone. Recent statistics show that a mere 56 percent of students who get admission to four-year programs in college graduate within six years of admission. Only 29 percent of students enrolled in two-year programs complete their studies within three years. As for the rest, some spend several more years striving towards a degree, while others just decide to drop out due to various reasons.  The common triggers that lead students are summarized in the figure below.What Happens to Student Loans When You Drop Out

Dropping out of school, for whatever reason, has financial implication in the sense that they are still responsible for the student loans they may have incurred. At the same time, they lack the competitive advantage acquired by those who complete their studies. This article explores the implications of dropping out on your student loan status, as well as options you may have to relieve the burden and for taking out student loans mid semester.

Can I Drop Out Without Defaulting Student Loans for Trade School?

Without a steady source of income, students are at a high risk of defaulting on their loan repayments. Those who drop out midway through college are at greater risk compared to graduates. While there are funding options besides federal funding, including Sallie Mae trade school loans, failing to repay your loans, damages your credit rating, making it hard to qualify for mortgages, credit cards, and other financial tools. To avoid defaulting your loan after dropping out of college, the first important step would be to seek professional assistance which can help you learn about repayment alternatives. Here are useful tips:

  • Consider going back part-time instead of quitting completely — This way your student loans go into deferment, while you can still engage in gainful work. People take loans to go to college and get jobs. So, consider working part-time and studying at the same time. In addition, your loans will not be due until your graduation. In any case, once you graduate, you will be more employable and will find it easier to complete the repayments.
  • Consider various repayment plan alternatives — Ask the servicer of your student loan about other options that could be more manageable. You may also get approved for deferment for a brief period. Ask such questions as ‘how many credits do I need to take to defer student loans?’. However, keep in mind that the interest rates keep accumulating even during the period of deferment.
  • Consider taking a public service job and seeking loan forgiveness — This last alternative is only possible if you have already made 120 successful repayments, and if your employer qualifies. It will only be applicable if the career path you have chosen is in public service.

How Can I Take a Semester Off from College with Student Loans?

Instead of dropping out completely, a short break from school may be just what you need, without having to suffer the financial implications. In this respect, a short break can be described as taking a semester off and coming back later to resume studies. There are several reasons why students may decide to take a break, including:

  • To concentrate on full-time work for enough for the next level of education — These students, faced with financial constraints, may choose to seek resources without having to drop out of school.
  • Sickness or stress
  • Traveling
  • Taking time off to care for ailing loved ones

Whatever the reason, the question that you should be asking yourself is ‘do I have to pay student loans if I go back to school?’. In other words, you must consider the impact of your time off on your student loans. For those with federal loans, it is possible for your break to be covered by the grace period, although, depending on the specific situation, you may qualify for forbearance or deferment should your loans go into repayment during your time off.

When you take a semester break from college, in most cases, your loans automatically fall into a grace period, during which your lender will not demand repayment. The unsubsidized and subsidized student loans from the department of education have a six-month grace period, while Perkins loans have nine months. Once or before the grace period elapses, you are advised to officially re-enroll, resetting your grace period. Those who do not re-enroll immediately, and whose loans are, thereby due, face challenges in getting access to further financial help due to a poor credit rating. Even then, not all hope is lost as you could consider trade school loans no credit. These are non-credit based student loans that do not require a background check. Most importantly, students who drop out mid-semester may get refunds on their federal loans, but may still owe college tuition.

If You Go Back to School Do Your Student Loans Stop Immediately?

As soon as you take a break from your studies, whether temporary or permanently, the grace period begins for your student loans. This is six months for most federal loans. Upon the expiry of this period, students stand the risk of landing in repayment, and failure to do so can mean that they are labeled as defaulters. So if you are asking the question ‘can I go back to school if I owe student loans?’, once the grace period elapses, you will not be able to get a grace period for the same loans, even if you return. In the event that you are unable to re-enroll, you can either defer or seek forbearance on your loan.

Back to the question of ‘can you go back to school if you owe student loans?’ the simple answer is yes. However, communication is critical. Notify your financial aid office about your planned break, and inquire about possible implications. The most important thing is that life does not end if you drop out of or take a break from college.