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A Serious and Overlooked Consequence of Dropping Out of College

By Maurie Backman – Updated Feb 3, 2020 at 5:14PM

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Not having a degree can make finding a job harder -- but that's not all.

Not everyone who begins college walks away with a degree. You might start off at a decent school with smart professors, only to realize early on that the line of work you want to pursue doesn't require a degree. Or, you might have a medical condition that makes college too challenging to handle, or encounter personal or family issues that force you to abandon your studies midway through.

But while there are many reasons for failing to come away with a degree in hand, there are also consequences. Not finishing your studies could result in a scenario where it's hard to find a job, or a well-paying one. And that's not the only problem. You may also be more likely to struggle to repay the student loans you took out while you were in school. 

A young man working in a dark office looking stressed in front of his computer.

Image source: Getty Images

The problem with dropping out of college

Many students who finish college struggle to pay off their student debt, so much so that they reach the point of default. But while anyone with outstanding loans risks that fate, the default rate among student debt holders who didn't complete a degree is three times as high as the rate for borrowers who did finish up their studies. 

The reason? Those without degrees often struggle to earn a decent wage. And without a solid income, paying off that debt can be difficult to impossible. 

In 2015, college graduates, on average, earned 56% more than those with high school diplomas alone, according to the Economic Policy Institute. That's a sizable gap. And while federal student loans do allow borrowers to apply for income-driven repayment plans, where their monthly loan payments are recalculated as a small percentage of their income, even that could prove burdensome for low wage-earners. Plus, not all student loans are federal in nature. Private loans don't offer official income-driven repayment plans, so those in that camp may be more likely to default on their debt.

Defaulting has consequences

Defaulting on student debt is something borrowers should avoid doing at all costs. For one thing, if you default, it could damage your credit score, making it difficult to borrow money when you need to. Furthermore, when you default on either federal or private student loans, your lender could start garnishing your wages. And when you're a low earner to begin with, that can make for a dire financial situation. 

A better bet? Do everything in your power to avoid defaulting. If you're holding federal student loans, get on an income-based repayment plan, or apply to defer your loan payments for a period of time if money is unbearably tight. If you borrowed privately, reach out to your lender and try negotiating your repayment terms. That could mean asking for a lower monthly payment or even requesting to defer payments for a few months until you're able to get back on your feet.

Though the possibility of student debt default exists even when you finish college, if you drop out midway through, be aware of the added risk involved -- and do everything in your power to avoid going too long without making a loan payment.


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