Lana Oconnell
If you're a student borrower thinking about dropping out of university, it's important to understand the financial repercussions of your decision. Your loan status will change, and you will likely need to start making payments soon after leaving. However, this depends on the type of loan and your provider's policies. Federal student loans often allow a six-month grace period, but interest may continue to accrue. Private student loans vary widely, and you may have a shorter grace period or none at all. Additionally, you may need to repay grants, bursaries, or scholarships, depending on the stipulations. It's crucial to proactively create a plan to address your student loan situation and understand your overall financial picture, including other debts.
| Characteristics | Values |
|---|---|
| When do you need to start repaying the loan? | You'll need to start repaying the loan from the April after you withdraw from your course. |
| What if you can't repay the full amount? | You can ask the Student Loans Company to set up a repayment plan. |
| Do you need to pay back grants or bursaries? | If any of your grant or bursary covers the period after you've left your course, this counts as an overpayment and you'll need to repay it straight away. |
| What happens if you drop out before completing 60% of the semester? | You'll be required to repay some or all of the federal student grants. |
| What happens if you drop out after completing 60% of the semester? | You don't need to repay federal student grants. |
| What happens to your loan if you drop below half-time status? | You'll trigger early repayment if your enrollment drops below half-time status. |
| What happens if you can't make payments? | Contact your student loan servicer to understand your options. |
| What happens if you drop out but still want to live in student accommodation? | You may be stuck with an expensive contract. |
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What You'll Learn
Loans must be repaid, but not immediately
If you leave university, you will still have to repay your student loan, but not necessarily all of it, and not right away. The amount you repay depends on a few factors, including the date you dropped out, the number of days you attended your course, and the type of loan or financial aid you have.
Overpayments
If any of your loan covers the period after you’ve left your course, this counts as an overpayment, and you’ll need to repay it straight away. Your university or college will inform your student finance provider of your last day of attendance, and they will reassess your loan. If you cannot repay the full amount, you can ask them to set up a repayment plan.
Grace periods
Federal student loans often allow a six-month grace period before you have to start making payments after leaving school. This period gives you time to get your finances in order and find a job. During this time, unsubsidized loans will continue to accrue interest, so your loan balance will be higher.
Repayment thresholds
You will only have to start repaying the rest of your loan once you start earning over a certain threshold. The threshold amount varies depending on your repayment plan.
Other financial aid
If you received a grant, bursary, or scholarship, you will need to get in touch with the provider to let them know you have dropped out of university and will need to stop receiving payments. You may be required to repay some or all of the grant or bursary, depending on the type of grant and when you dropped out.
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Overpayments must be repaid straight away
If you leave university, your student loan debt doesn't disappear. You will need to start repaying your loan, but the specifics will depend on the type of loan and your location. In the UK, your university or college will inform your student finance provider of the date you finished your studies, and they will reassess your loan based on the number of days you attended. Any part of your loan that covers the period after you left your course is considered an overpayment and must be repaid immediately. The Student Loans Company will inform you of the amount you must repay, and if you are unable to repay the full amount, they can set up a repayment plan.
It is important to understand your repayment obligations before leaving university. In the US, federal student loans typically offer a six-month grace period after withdrawal before bills start arriving. During this time, it is crucial to understand the potential impacts and protect against the possibility of default. Leaving university can impact other financial aid as well, such as grants, scholarships, and bursaries. The terms of these awards vary, and you may need to repay some or all of the funds if you do not finish your program.
To summarise, while overpayments must be repaid immediately, there are options to set up repayment plans if needed. It is important to understand your specific loan agreements and seek advice from your university and student finance providers to ensure you are aware of your financial obligations.
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Grants and bursaries may not need to be repaid
If you decide to leave university, you will likely still need to repay your student loans. However, grants and bursaries, in general, do not have to be paid back. These include Disabled Students' Allowances (DSA), an NHS bursary, or money from your university's hardship fund.
It is important to note that you are only entitled to these grants and bursaries as long as you are enrolled as a student. Therefore, you must inform your university of the exact date you decide to terminate your studies to avoid having to pay back any money you were not entitled to. If you received grants or bursaries from other sources, you must contact the provider to inform them of your withdrawal and stop receiving payments.
The Student Loans Company (SLC) will reassess your situation to ensure you are not left in a difficult financial situation. They will get in touch with you to arrange an affordable repayment plan for your student loans. You will only have to start repaying the rest of your loan from the April after you withdraw from your course, and even then, you must be earning over the repayment threshold. This threshold varies depending on your repayment plan.
It is worth noting that if any of your grant or bursary covers the period after you have left your course, this is considered an overpayment, and you will need to repay it immediately.
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Private lenders have varying loan agreement terms
Private student loans are handled by private lenders, so loan agreement terms vary widely. It is important to understand the payment obligations for all your loans before dropping out of college. Private lenders have different policies regarding grace periods, interest accrual, and eligibility requirements. Some private lenders may offer a grace period of up to six months before payments are due, while others may have shorter or no grace periods at all. During this time, interest will likely continue to accrue, increasing the overall loan balance.
It is crucial to carefully review the terms of your private student loan agreement or contact your lender directly to understand the specific implications of withdrawing from university. Private lenders may have enrollment requirements that can impact your loan eligibility. For example, dropping below half-time enrollment status may trigger a change in your loan status to "withdrawn," initiating the repayment period unless a grace period is in place.
Additionally, private lenders may have specific requirements regarding the refund of overpayments. In some cases, the amount of loan covering the period after you leave your course may be considered an overpayment and must be repaid immediately. Understanding these varying loan agreement terms with private lenders is essential to making informed decisions about your university education and financial obligations.
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You may be able to appeal the loan
If you decide to leave university, you may still have to pay back your student loan. The amount you repay will depend on the date you dropped out. Your university or college will inform your student finance provider of your last day of attendance, and your loan will be recalculated based on the number of days you attended your course. Any loan covering the period after you left your course will be considered an overpayment and must be repaid immediately.
You may be able to appeal your student loan if you believe the student finance provider has not followed the student support regulations correctly. For example, if they did not take your previous study into account. Appeals must be made as soon as possible, and you will need to provide evidence to support your case. If your appeal is rejected, you will be informed of the reasons why.
Appeals can be made by email or post. If you are emailing, ensure you are using the same email account linked to your student finance account. You can either download and complete the appeals form or write an email explaining your appeal. Be sure to include your CRN in the email subject.
It is important to note that you cannot appeal the amount of maintenance loan you receive unless there was an issue with your application, such as evidence not being processed correctly.
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Frequently asked questions
If you leave university, you will no longer be entitled to student finance and will have to start paying back your loan. The amount you need to pay back depends on the type of loan you have, when you leave your course, and whether you plan to return. Typically, there is a six-month grace period before you need to start repaying your loan.
Any grant or bursary you received that covers the period after you've left your course will need to be paid back. However, Disabled Students' Allowances (DSA), an NHS bursary, or money from your university's hardship fund do not need to be paid back.
If you suspend your studies due to illness or serious personal reasons, you might still be able to get student finance while you're away. You can request an additional 60 days of funding from your university, which will be put forward to the Student Loans Company.
If you can't afford to pay back your loan, you can apply for deferment or forbearance, which will give you a temporary payment pause of up to one year. You can also look into an income-driven repayment plan to lower your monthly payments.
If you're thinking of leaving university, it's important to understand your options for addressing your student loan situation. You should also follow your school's policies for formally withdrawing from classes and let your university know the exact date you plan to terminate your studies.
