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Guide to Dropping Out of College

Guide to Dropping Out of College
Melissa Brock
Melissa BrockUpdated November 21, 2022
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Students may drop out of college for many reasons, including financial issues, medical problems, too-steep academic demands or failing grades, getting a job, or problems at home that warrant their attention. According to the most recent data from the National Center for Education Statistics, the six-year graduation rate among first-time, full-time undergraduate students who began seeking a bachelor’s degree in 2014 was 64% as of 2020.Dropping out of college is a big decision, and there's a right and wrong way to go about the process. Before you move forward, it helps to know how to drop out of college properly. It’s also important to look ahead to what dropping out means for your student loans and consider how you’ll pay off student loans after leaving school.

What Does Dropping Out of College Mean?

Dropping out of college could mean that you plan to withdraw from your college or university without completing your degree. It also could mean that you plan to transfer to another institution or take a break from your studies (without a formal leave of absence). You may qualify for a formal leave of absence if you do not plan to enroll at your current school for at least one semester and plan to return within two academic years. With this option, you can retain an active student status and continue your program when you return. It's important to check your school's definition and time requirements for a formal leave of absence, as the specifics can vary from institution to institution.Related: 8 Reasons Students Drop Out of College

4 Steps to Consider Taking When Dropping Out

As mentioned earlier, there's a right way and a wrong way to drop out of college. You don't just want to stop going to class one day. Here are the "right" steps to take to drop out of college, from talking to your advisor or counselor to considering alternatives to college.

1. Talk to Your Advisor or Counselor

First, speak with your academic advisor or counselor. They may have worked with other students in the past in your same situation. Consider telling them your story, and explain what you’re going through. From there, your advisor can walk you through all of your options. They may advise you to consider a leave of absence when you may have thought your only option was to withdraw from classes. If you do decide to withdraw from classes, you’ll be considered an "inactive student." If you’d like to return to the college or university, you may have to reapply.If you're not sure who to speak to regarding your situation, contact the academic advising department at your college or university. You may be able to find the department's contact information on the institution's website.

2. Consider Finishing Your Semester

It's a good idea to consider finishing the semester you're currently in. That’s because dropping out late in the semester could mean you must pay the bill without earning the credits for the classes in which you’d initially enrolled.Whether you decide to finish the semester or not, you will likely need to formally withdraw by submitting a withdrawal form.

3. Check If Your School Has a Refund Policy

What is the refund policy at your college or university? In most cases, how much of a refund you’ll receive depends when you withdraw. For example, if you withdraw prior to the beginning of an academic term or during the add/drop period of that term, you'll likely receive a full tuition, fee, and room and board refund. You may have to pay a withdrawal fee, however. All refunds after the start of school will likely be prorated up to a certain point in the semester, such as up to the 60% point of the semester. Refunds may not be offered after that point. Prorated refunds depend on the percentage of the semester you complete up to the official withdrawal date. Each school has its own policies, so ask about the refund policies at your institution. 

4. Think About Alternatives to College

If you stop racking up college credit hours, you're likely going to need a backup plan. Ask yourself, "Should I drop out of college?” and “What will I do instead?" You may want to consider some of the following options:
  • Getting an apprenticeship
  • Enrolling in a coding boot camp
  • Starting your own business
  • Attending vocational school or trade school
  • Enlisting in the military
  • Getting a job
Weigh the pros and cons of each alternative to college. What fits your specific needs and career goals? You may consider meeting with a career counselor to help you make a plan.

Can You Go Back to College After Dropping Out?

Yes, you can go back to college after dropping out. You may want to consider attending the same college or university you had initially dropped out of, or you may choose to attend a different institution. Some colleges and universities may allow you to return without reapplying for admission, while others require will you to reapply — though sometimes with a shorter application process. If you’d like to continue your education at a college or university you previously attended, ask the admission office for more information about the application process and how to return.

What Dropping Out of College Means for Your Student Loans

You will still have to repay your student loans even if you withdraw from college. When you tell your college or university that you plan to withdraw, the school lets your lender know about your enrollment status change and your federal student loans go into "repayment mode."  Refer to your loan promissory agreement to find out your loan terms, check your student loan balance, and contact your lender directly to ask how it handles payments.Keep in mind that you may also have to repay federal grants in some cases, even though grants are often a type of financial aid that doesn't have to be repaid. If you withdraw early from your program (and a grant was given for that program) or received a TEACH Grant but did not end up fulfilling the requirements, you may need to repay the amount received.

When You Will Need to Start Paying Back Your Loans

Federal regulations require students to complete the term for which they were given money. The college or university you attend must calculate how much of the semester you did attend to determine the amount of aid you earned. You must pay back that which you did not earn.Certain federal loans offer a grace period, which is a period of time in which you can put off making payments. This gives you space to plan for the next stage in your life. For example, Direct Subsidized and Direct Unsubsidized loans offer a six-month grace period. The major difference between the two loans is that the U.S. Department of Education pays the interest while you’re in school at least half-time, during the grace period, and if loans are deferred with Direct Subsidized loans. On a Direct Unsubsidized loan, the borrower is responsible for paying the interest at all times, which does accrue during the grace period.PLUS loans, which are loans that parents can borrow to pay for their children's college education, don’t have grace periods. However, parents can request a deferment. Graduate PLUS borrowers, available to those in graduate or professional school, can qualify for a six-month deferment period after meeting half-time status or leaving school altogether.Private student loans, on the other hand, may not offer a grace period. Check with your lender for more specific information about when you must begin repaying your loans.

Paying Off Student Loans After Dropping Out

When paying off student loans after dropping out, you may have some alternatives at your disposal. Let's take a look at the choices you might consider.

Student Loan Deferment

Federal student loan deferment allows you to temporarily stop making loan payments on your federal student loans. To prove that you’re eligible for deferment, you must fill out a form for your student loan servicer and show documentation. Typical reasons for federal student loan deferment include:
  • Cancer treatment
  • Economic hardship
  • Military service and post-active duty
  • Rehabilitation training
  • Unemployment deferment

Student Loan Forbearance

Federal student loan forbearance, which usually lasts no more than 12 months at a time, also allows you to temporarily pause your payments. However, you must still pay interest on your loans. You can either pay the interest as it accrues or allow it to fully accrue to the end of the forbearance period. In order to get a forbearance, you can submit a request to your student loan servicer and provide documentation that proves you meet the requirements. You can general forbearance if you show evidence of financial difficulties, medical expenses, employment changes, and other reasons that your servicer finds acceptable. There are also reasons you may get mandatory forbearance for federal student loans, including:
  • Serving in an AmeriCorps position
  • Qualifying for partial loan repayment under the U.S. Department of Defense Student Loan Repayment Program
  • Serving in a medical or dental internship or residency
  • Completing National Guard duty (but you’re not eligible for military deferment)
  • Qualifying through teacher loan forgiveness forbearance
  • If the total amount you owe each month for all the federal student loans you received is 20% or more of your total monthly gross income
Related: Will There Be a Student Loan Forbearance Extension?

Refinancing Student Loans

You can refinance student loans with no degree. When refinancing a student loan, a lender will replace your current loan with a new loan at a more favorable interest rate or loan term.You could see a substantial reduction in your interest rate. However, keep in mind that refinancing federal student loans disqualifies you from taking advantage of federal repayment programs, including income-driven repayment plans, Teacher Loan Forgiveness, and Public Service Loan Forgiveness (PSLF).Learn more about the risks and benefits of student loan refinancing before you choose to refinance.

Employers That Pay Off Student Loans

Some employers will also help you take care of your student loans. Several loan forgiveness programs can help you, such as Teacher Loan Forgiveness programs and PSLF, which is available to those who work in the public service sector for a qualifying organization.Other types of employers that may offer a student loan payoff perk include: 
  • Federal agencies
  • Medical organizations
  • The automotive industry
  • Law firms
  • The Peace Corps
  • The U.S. Department of Agriculture (for veterinarians)
It's a good idea to find out whether any jobs you're pursuing are eligible for loan forgiveness. In order to attract and retain talent, many companies offer tuition reimbursement (where they help you pay for college classes) and may pay off your student loans. 

Is Student Loan Forgiveness an Option for Dropouts?

Yes, federal student loan forgiveness is an option for those who don't finish college. Forgiveness generally means that you're no longer obligated to finish paying your loans due to your job. For example, if you pursue a job in the automotive industry, you may qualify for loan forgiveness through the Specialty Equipment Market Association (SEMA) Loan Forgiveness Program.The fact that you didn't finish college doesn't mean that you can't tap into federal loan forgiveness programs, including PSLF. However, if you have private loans, the same forgiveness options may not be available to you. Ask your lender or servicer for more information.Also, keep in mind that you should watch out for student loan forgiveness scams. Be aware of potential red flags, such as promises of immediate student loan relief or requests for money upfront or for sensitive information, such as your Social Security number.

The Takeaway

Now that you know the correct steps for how to drop out of college, note that the process can vary depending on the type of college you attend. Learning the steps of how to drop out of community college may be vastly different from dropping out of an Ivy League institution, for example. The process might even vary between two similar institutions.  Ultimately, it's important to understand that you will have to pay back your student loans, and in some cases, federal grants as well.

3 Student Loan Refinance Tips

  1. Refinancing your student loan can lower your monthly payments and help you adjust your loan term. Compare student loan refinancing rates to find a loan that works for you.
  2. One pain-free way to pay down your student loan sooner: send in your tax refund to put against the principal balance. Since it’s money that has already been taken out of your pay, you won’t miss it.
  3. If you teach full-time for five complete and consecutive academic years in a low-income school, you may be eligible for federal student loan forgiveness.

Frequently Asked Questions

What are some reasons people drop out of college?
Do you have to pay financial aid back if you drop out of college?
What happens if you just stop attending college?
Photo credit: iStock/Sam Edwards

About the Author

Melissa Brock

Melissa Brock

Melissa Brock is a higher education and personal finance expert with more than a decade of experience writing online content. She spent 12 years in college admission prior to switching to full-time freelance writing and editing. Her work has appeared on Yahoo Finance, Entrepreneur, Investopedia, The Balance, FinanceBuzz, The Journal of College Admission, MarketBeat, College Finance, Rocket Mortgage, LeverageRx, Benzinga, Morty, Ally, and more.
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