College is definitely expensive. If you’ve made it through one or two years of college, you already know how much you’re spending every year, and it’s possible to feel like you would save money if you dropped out. However, dropping out probably won’t help you save very much. Here’s what you need to know about paying off student debt if you drop out of college.
The only benefit you might have over a graduated student if you drop out is that your loans will be technically lower. On average, a graduated student ends up with about $28,400 in debt. If you drop out after only two years, you’ll end up with about $14,200 in debt instead. Though this can seem appealing at first, it’s important to pay attention to all the other elements of dropping out.
Income Over Time
One of the most important elements to consider has to do with the income you may be able to achieve as a college graduate versus someone with “some college experience.” According to the U.S. Bureau of Labor Statistics, those who report “some college” have a median income of $41,704, while those with a four-year bachelor’s degree have a median income of $62,296. That’s about 49% more, meaning you can pay off your loans much faster.
When you have a lower income, you’re more likely to stick to making minimum payments, which means you’ll end up paying significantly more interest over time. As a matter of fact, on average, a graduated student will spend $11,944 on interest, while someone who dropped out after two years will spend $13,635 on interest – more than the graduated student even though their loan was smaller.
Refinancing can significantly help with interest problems. For example, if you currently have a loan at 4.66% interest for two years of college, refinancing to 3.66% would lower your minimum payment and cost you $3,355 less in interest. However, the problem is that many banks will only offer refinancing options to people who have graduated. You’re more likely to get access to that lower interest percentage if you actually graduate.
Length of Student Loan Payments
After all is said and done, dropping out of college may actually make it take longer for you to pay off your student loans. Because of a combination of high interest rates, lower minimum payments, and less disposable income, those who drop out take nearly twice as long to pay off their student loans. Graduates take about 19 years on average, while non-graduates take about 34 years on average. Dropping out may actually increase the issues you have with your debts.
Clearly, dropping out isn’t going to fix your college debt burden. In fact, it may even increase it by making you unable to pay as much as quickly. If you’re able to, lasting out the college experience can make it easier for you to get a well-paying job and pay off your loans more quickly. Make sure you use online resources to study for your classes and make it all the way through college to lessen your overall debt burden.