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How Long Will It Take to Pay Off Student Debt If You Don't Graduate College?

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A college degree leads to higher earnings. Throughout a career, this can add up to significant financial gains. But there's another financial disparity between students who graduate and students who only attend some college. 

Students who took out loans to pay for college but didn't graduate have the financial obligation of the debt without the income advantages of a diploma. 

What are the long-term financial differences between the two student debt scenarios of graduates and dropouts? Let's calculate how long it takes to pay off college loans without a college degree.

paying off student loan debt without a college degree

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Student Loan Repayment Without a College Degree

For many high school students, federal loans are often part of the financial aid package received after filing a FAFSA (Free Application for Federal Student Aid). However, the long-term impact of these loans is affected by whether or not the student completes their degree. 

Student loan borrowers who attend some college may borrow less money than graduates, but it takes longer to pay it off. As a result, students who don't graduate pay nearly twice as much money as they borrowed because of interest accrual. Here's how the math adds up in the two scenarios of a college dropout and a college graduate. 

College Graduates

The average student loan debt for undergraduates after four years of school is about $28,400 per borrower. That's about $7,100 per year. Let's assume an interest rate of 4.66 percent, and that graduates would be able to make higher monthly payments based on the higher average earnings of those with a bachelor's degree. 

According to data from the Department of Education, college graduates have 58 percent of their loan balance left 12 years after starting college. Based on this repayment rate, student loans would be fully paid off within 20 years after starting college. 

By borrowing $28,400 and making monthly payments of $210, the total loan cost would add up to $40,344. The $11,944 paid in interest adds 42 percent to the initial loan balance. 

College Dropouts

In this scenario, let's look at a student who attended two years of college but didn't earn a degree. Using the estimate of $7,100 in student debt per year, they would leave school with $14,200 in loans. Again, we'll assume 4.66 percent interest, but monthly payments will be lower because of lower annual earnings. 

The Department of Education says that 12 years after starting college, those who didn't complete their degree still owed 84 percent of their loan balance. They've only managed to pay off 16 percent. Even though the amount borrowed was less, it's harder to pay off. 

After borrowing $14,200 to attend two years of school, monthly payments of $70 would fully pay off the loan within 35 years after starting college as a freshman. Without the income boost of a degree, students who don't graduate are in debt about 15 years longer than those who have a degree. 

As a result, interest would accrue to $13,635 for a total loan cost of $27,835. The interest nearly doubles the initial amount borrowed. Because college graduates are earning enough to pay off their loans faster, the amount of interest paid is lower.

How Big Is the Problem of Student Loan Borrowers Who Don't Graduate?

The problem of having student debt without a degree is bigger than you may realize. When we looked at how many student loan borrowers never graduate, we found that out of all the students who take out loans when they start higher education, 57 percent drop out before graduating. 

To put that number into context, consider that the dropout rate for all college students is about 40 percent. Therefore, college students who take out loans are dropping out of school at higher rates than all students. 

There are cases where students drop out of college to build a startup or because they were recruited for a lucrative job opportunity. In these cases, the student loan repayment wouldn't be any more burdensome than that of a typical college graduate. However, statistically speaking, those who don't graduate will face a larger long-term debt burden. 

What Happens to Student Loans When You Drop Out of College?

If you drop out of college, your student loans don't disappear. Some student loans have a six or nine-month grace period after you leave school before you have to start your student loan payments. 

After leaving school, it's a good idea to contact your finance provider about your repayment plan. The standard repayment plan isn't for everyone, and you can request an income-driven repayment plan that matches your needs. 

Getting a payment plan that works for you can help you avoid problems long into the future. For example, if you are using your credit card to make the minimum payments on your loans, you are just transferring the debt to another account with a higher interest rate.

Talking with your loan provider is also an opportunity to discuss applicable student loan programs. For example, you could be eligible for forbearance, deferment or consolidation. There are also new loan policies available because of COVID-19. Payments on federal student loans are automatically suspended through the end of 2020. The legislation doesn't affect private student loans. 

Some students are getting creative about deferring student loans. Enrolling in community college full-time may be a way to postpone payments while continuing your education. 

Can You Refinance Student Loans if You Don't Graduate?

Refinancing is a key strategy to reduce the amount of interest you pay on a student loan. For example, using the above scenario for a student without a degree, refinancing to 3.66 percent can lower payments to $62 per month. Over the same repayment period, the student loan would cost $3,355 less. 

If you don't have a degree, many lenders won't let you refinance. However, options may be available in some cases. If you do qualify, your credit score and current income could affect your rates. Keep in mind that refinancing through a private loan company could disqualify you from some federal programs such as loan deferment or Public Service Loan Forgiveness. 

Finishing Your Degree Can Help Manage Student Loan Strain

College is tough, but there are clear financial advantages to earning a degree. According to the most recent data from the U.S. Bureau of Labor Statistics, those who have a bachelor's degree earn about 49 percent more than those who have some college, and earning more can help you pay student debt faster.

Median Income

  • Some college: $41,704
  • Associates degree: $44,823
  • Bachelor's degree: $62,296

If you are struggling with your college classes, grades and course load, keep in mind that today's academic resources can provide valuable help. All types of students can benefit. With online learning tools, students can spend more time studying and less time on busywork. Shared resources can help fill in any learning gaps and provide a way for students to catch up if they've missed a class.

About 90 percent of users have improved by at least one letter grade by using study guides and class notes on OneClass.

With these resources, students can stay in college, keep a scholarship, land an internship, or graduate on time. Even though budgets can be tight while in college, investing in learning tools now can have a lasting impact on your finances for decades. 

OneClass also offers an option to earn while you learn where Official Note Takers can earn $470 per course for uploading class notes. Side hustles can help you make extra payments before your loans are due, ultimately reducing the length of your loan term. 
Search for your college to find out what learning tools your classmates have uploaded to OneClass.

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