by Robert Farrington, Senior Contributor,
The decision to attend college is one that’s fraught with controversy these days, and this is mostly due to the growing costs. With average tuition and fees reaching $10,230 for the 2018-19 school year for even public, four-year in-state schools according to College Board, there are many degrees that don’t have an attractive return-on-investment. Some students may even be better off attending trade school or starting their own business.
Compound these rising costs with the rising average student loan debt, and it can be daunting.
Unfortunately, many people don’t decide to ditch college until after they’ve already started. While the decision to leave school doesn’t mark the end of the world, there can be real financial consequences that come into play.
If you’re thinking of dropping out of school (or even just dropping classes below full-time) and wondering what comes next, keep reading to find out what happens to any financial aid you received, including student loans.
You May Be Required To Repay Pell Grants
A Federal Pell Grant is financial aid that is typically only awarded to undergraduates with exceptional financial need. This type of aid is typically distributed to students via their college of choice, and usually does not need to be paid.
But, like all good things, the devil is in the details. The U.S. Department of Education notes that you may have to repay all or part of your Pell Grant if you “withdraw from the program for which the grant was given to you.”
They also note that, if you do have to repay part of a Pell Grant, your school will notify you and you’ll have 45 days to repay amounts owed. If you don’t have all the cash, you also have the option to enter into a satisfactory repayment arrangement.
If you’re a teacher who applied for the TEACH Grant program and you dropout of college, you may be on the hook for further repayment of financial aid. This program offers up to $4,000 per year for students who are pursuing a career in teaching and meet very specific eligibility requirements. For example, you must work as a teacher in a high need area for four academic years out of the following eight years after graduation to qualify.
Dropping out of college or otherwise not fulling the requirements for your TEACH grant means your grant money will be converted into Direct Unsubsidized Loans. Not only must you repay the full amount you owe, but you’ll be charged interest from the date each TEACH grant was distributed.
What About Student Loans?
If you took out federal or private student loans during your stint in college, you should also prepare yourself to repay every dollar you borrowed — plus interest. Student loans are notoriously difficult to discharge in bankruptcy, so there is little chance you’ll get out of repaying the money back.
This can be especially unfortunate when you dropout of school several years into college after accruing tens of thousands in debt. Not only do you have a huge student loan bill to worry about, but you don’t have a college degree that could potentially boost your income for repayment.
Other Scholarship And Grant Programs
Additional scholarship and grant programs you received will likely have their own rules that dictate what happens when you dropout of college early. If you’re on the fence about leaving college, it’s smart to conduct due diligence on all financial aid you received to determine what you may owe after you leave, if anything.
Stuck Repaying Financial Aid? Here’s What to Do Next
Are you grappling with student loan debt even though you left college early? Remember that all isn’t lost. You’ll need to repay any monies you owe, but you do have options. Here are some to consider as you plan your next steps:
1. Consider An Income-Driven Repayment Plan For Your Student Loans
Federal student loan debt you have may be moved to an income-driven repayment plan if you qualify. With income-driven repayment plans, you get to pay a percentage of your discretionary income for 20-25 years before ultimately having your student loan debt forgiven.
Note that, while many federal student loans qualify for these programs, private student loans and other financial aid you’ve received do not.
2. Look At Deferment Or Forbearance Options
Both deferment and forbearance can help students get a break from student loan debt when they’re experiencing financial hardship and struggling to get back on their feet. Deferment can last up to three years and, depending on the type of federal loans it applies to, interest may not accrue during that time. Forbearance, on the other hand, lasts for up to 12 months but interest accrues the entire time.
Remember that both deferment and forbearance can help you temporarily, but they won’t last forever. At a certain point, you’ll need to start repaying your loans and any additional interest that accrues.
3. Consider Student Loan Refinancing
Refinancing all your student debt with a private lender is another option to consider if you can qualify and you have an income you can utilize to repay your new loan. Just remember that many private lenders require you to have a college degree before you can refinance, so many companies that offer refinancing will be off the table.
There are additional downsides to refinancing student loans with a private lender — even if you can even find one to work with. For example, you’ll lose out on federal benefits like income-driven repayment plans, deferment, and forbearance if you refinance federal student loans with a private lender.
Also note that you usually need good credit to refinance your student loans with a private lender — or at least a cosigner with great credit who is willing to be on the loan with you.
4. Earn More With A Side Hustle
Finally, don’t forget that you have some power of your income — even if you don’t feel very in control. You may have missed out on the degree you were once pursuing, but there are ways to earn extra money you could apply toward loans if you’re willing to think outside the box.
You could drive for Uber or watch pets using Rover.com. Get paid to teach neighborhood kids how to play the guitar or piano. Become an online freelance writer. Start an income-producing blog.
There are a ton of ways to earn money on the side if you’re willing to do the work. And if you have a ton of student debt that won’t go away, you may have to.
This can be an excellent strategy whether you drop some or all of your classes.