What Happens When You Quit College and You Have a Student Loan?

College costs just keep going up -- that’s why 15 million people in the United States get $150 billion each year in student aid. And that’s just from the federal government. If you quit college, you’re supposed to start repaying your student loans within a few months -- although a lot depends on your circumstances.

Student Loan Terms

Federal student loans are deferred while you are attending college. In other words, you don’t have to start paying the money back while you are still taking classes. There are several federal student loan programs, including Stafford and Perkins loans. If you’re eligible for subsidized Stafford loans, the federal government even pays the interest on the loan while you’re in school. You are charged interest on other federal student loans. However, you can choose to add the interest to the principal amount of the loan instead of paying it while you’re in school.


The U.S. Department of Education gives you a grace period of at least six months to start repayment, even if you quit college without finishing. During the grace period, contact your loan servicer. A loan servicer is a financial institution that administers the repayment of student loans. You have some options. You can choose plans with lower payments and a longer repayment period, for example. Another option is to make small payments at first and larger payments in the future. You may also have the option of consolidating multiple student loans into a single loan

When You Can't Pay

Sometimes people just can’t pay their student loans after they quit college. For example, you might not find a job that pays enough, or you might have quit college for medical reasons. If you run into problems, you can get a forbearance that suspends your payments for up to one year, although interest will still continue to accrue. In the case of economic hardship or military service, you can also apply for a deferment. And if you do return to college, your loan servicer will put the loans back into student deferment status for as long as you stay in school.

Whatever you do, don’t ignore those payments. Missed payments can ruin your credit. If you miss too many and default on a student loan, you can be subject to legal action, lose eligibility for future federal student loans and even have your wages garnished.

Private Loans

Private student loans are similar to those offered by the federal government. That is, payments are typically deferred while you are in school, there’s a grace period and then you have a choice of plans for repayment. Interest rates on private loans tend to be higher. Don’t assume that the terms exactly match those of the federal loans. Private lenders are free to set their own requirements, so check with yours.

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