Dropping Out of Grad School (Even if You Have Student Loans)

The idea of going to university may seem daunting at first, but a degree is something that every student should aspire to if they want the opportunity to have a better life. However, it is not always easy to manage the costs of studying, so the question is what is the best way to avoid the ever-increasing tuition fees? It is possible to get a student loan to tide you over during college and after graduation, but it is worth considering your options first.

If you’re starting to feel like the idea of graduate school is stifling you, it’s because it is. But there are ways to find the courage to start that road to the MBA without incurring huge student loan debts.

While a number of graduate students have intentionally dropped out of school to avoid student loan debt, there are sizable numbers who have no idea they even have student loans because they’re not aware of their financial aid status. However, those who do know they have loans often don’t know how to pay back their loans, what their repayment options are, or even whether they’re eligible for student loan forgiveness programs.. Read more about student loan forgiveness for dropouts and let us know what you think.If you think you can quit school, you’re not alone. Numerous readers have sent me letters questioning their decision to pursue doctoral studies and research. In one case, a dental student at the University of Washington dropped out after his first semester. He decided that the chance of getting a job at Amazon was more attractive than $300,000 in additional student debt.

Of course, there are many different reasons for quitting a course. Here are a few I’ve come across:

  • Loss of passion for the job and desire to change career
  • Concerns about more borrowing
  • Concerns about the labour market
  • Personal/family problems, such as. B. a move to take care of a sick relative
  • Mental health problems
  • Stress/anxiety
  • Working with difficult teachers

This is by no means an exhaustive list. If you are not in debt, leaving a master’s or doctoral program is a difficult decision. If this is the case, you may feel like you have no choice but to break up. We will show you why this is not the case.

How could you quit your studies halfway through?

Imagine arriving at the Fort Lauderdale airport to take a cruise and seeing giant billboards for Nova Southeastern University. You’ve always wanted to live in a warmer climate, and you learned that Nova offers four-year PsyD programs that allow you to become a professional psychologist. You decide to sign up because you think it will be a great experience.

Let’s say you have doubts after a year. You’ve taken out a $50,000 student loan and you don’t know what to do. Quitting is not an option, so you go further into debt and keep taking classes.

You had a panic attack after your sophomore year and decided you didn’t want to study psychology. You have $110,000 in student loans and two years to go. Are you trapped? Here are three options.

Option 1: Relies on PSLF to stop graduate school

If your debt is higher than your income, your payments are generally the same whether you owe $100,000 or $1 million. Income-based plans take a percentage of your income and do not take into account your debt.

This means that in the current insane loan system, the difference in income is what matters most when you go to school. If you plan to make a lot more money, it may be worth taking out multiple student loans as you will be spending 10% of your income on scheduled payments such as REPAYE or PAYE.

One way to prevent these obligations from lasting decades is to participate in the Public Service Loan Forgiveness Program (PSLF).

To qualify for this benefit, you must work full-time for a public sector or non-profit employer for 10 years while paying off your loans under an income-contingent plan.

Imagine being that Nova student who desperately wants to quit and do something else. You want to change your lifestyle and schedule to minimize the pain and regret.

You can quit the program and find a teaching job in South Florida, enroll in a REPAYE plan and pay $250 a month on your student loan. If your friends complete the PsyD program two years later, you have two of the ten years required for the PSLF. In addition, you would have earned two years of salary without incurring additional debt.

The balance of the study debt is waived after 10 years of tax-free employment. This means that with the PSLF, you can completely avoid a failed decision to go to graduate school. In America, one in four jobs is skilled, so you have plenty of choices.

That’s how much the former psychology doctor paid back in ten years if she had become a teacher instead. You will find that the amount waived is greater than the amount borrowed, because the interest rate keeps increasing as you make smaller repayments based on your income.

Option 2: Relying on the cancellation of the IDR to leave higher education

Imagine if you went to a for-profit law school for two years and decided your degree was worthless. You decide to drop out of law school before you get your J.D. because you have no intention of going to law school and you don’t want a $200,000 student debt to turn into $300,000.

Instead, you decide to start your own business instead of continuing to work as a lawyer for the rest of your academic career. You make $60,000 a year and learn that you can pay off about $350 a month in student loans. It’s frightening to see it grow every year.

To pay off your debts, you will have to make a big sacrifice. Instead, you can take advantage of income-based repayment by scheduling loan repayments with a PAYE plan. After 20 years, you must pay tax on the cancelled balance.

If you use your retirement accounts to the best of your ability, you can pay only $61,000 over 20 years and the final tax penalty will be $167,000. Due to inflation, this is much less than today’s $200,000 dollar value.

Option 3: Refinancing and disposal of student loans

A reader of Student Loan Planner® needed to refinance a debt, but had difficulty getting a loan from the company because he had not completed his education. We felt that by simply stating the degree of the driver’s license and his income, we could get a good price for him.

If you have a good debt to income ratio, many private lenders will look at that alone and give you a better interest rate than you currently have.

If your debt is federal debt, you should be aware that refinancing removes some protections, such as… B. Income-based repayment and debt forgiveness. However, if you only have $40,000 in student debt but earn $70,000 a year, you won’t benefit much from these provisions.

You can pressure yourself to get out of your student loans to achieve other financial goals in your life.

If you believe that your school has committed fraud, the school may of course be closed and you will be entitled to a discharge for the closed school. This can happen if you went to a law school that failed an exam and may be closing soon. However, for the vast majority of borrowers, this will not be the case.

This means that many borrowers with debt that is lower than their income may consider refinancing with a bachelor’s degree as proof of education.

Ask me about your student loans

Debt is a charge above a certain level

I hope you realize that with a debt to income ratio of 1.5 to 1, student loan debt is more of a tax than a debt.

In fact, you can pay back 10% of your income in loans and still have a good reputation. If your debt-to-income ratio is low enough, 10% of your income may be more than you would pay under a standard 10-year plan. This means that you will have to pay off the entire debt over time.

Getting kicked out of school doesn’t leave you unscathed. Paying a percentage of your income for 25 years just because you decide to go to school is definitely a bad thing, especially if you have no extra income.

At the same time, the flip side of the coin can be an acceptable price. It depends on how you feel about quitting graduate school. If taking your courses or doctorate leads you to depression, think again. You don’t want to think I’m stuck here for the rest of my life!

Many borrowers use loan forgiveness to recover from decisions made during their studies

Whether you’re considering dropping out of school or have already done so, federal loan forgiveness options are a great safety valve.

We have had several clients who had earned degrees in veterinary medicine, chiropractic and other disciplines, but then decided to completely change careers and become high school teachers. You have a good chance of tax-free debt relief through the PSLF program, which does not require you to use your degree.

Others even move abroad to take advantage of the foreign income exemption and pay $0 a month while making a living in another country.

Do not feel trapped in higher education (sunk costs are sunk costs)

It is up to you to decide if you want to complete the program or not. Whether you’re graduating or working on your master’s thesis, advancing your career isn’t worth it if you’re unhappy. If you have significant debt, you should only look ahead when deciding on a deduction.

If you don’t like the idea of pursuing the profession you graduated from, life is too short to pursue something you hate. Pay a 10% penalty on your income for the next few decades and do something else while being confident. Try to find a mentor or advisor who can support you.

If you don’t necessarily want to turn down the job, but just want to make an economic decision, look at your expected income after graduation. In some fields, like chiropractic, you’ll likely earn less than you would with a license, according to our own internal data.

If your debt-to-income ratio is high, the worst case scenario is that you will have to pay a percentage of your income, regardless of your income. This means that it is better to finish your last year of veterinary medicine and make $80,000 than to quit and make $50,000.

In economics, there is the concept of sunk costs. In other words, if you’ve already spent money and you’re not getting it back, don’t let your future decisions be determined by past spending. We humans are certainly not rational. That’s why we sit out the rest of this awful movie instead of leaving. We don’t like to admit we made a mistake.

The wisest thing to do is to look at the next few years of your life and ask yourself if you want to spend them doing something different. Then ask what about the next few decades. If you want to make a radical change, that’s fine.

You may have to adjust your budget a bit and have boring conversations with your uncles on Thanksgiving, but your own happiness and well-being should be your priority.

Reminder: You can also make ends meet after you start working, even if your student debt is twice as high as your income. We helped people do this analysis and showed them how to do it.

My best tips for success at school

My general advice to you: Do not give up unless one or more of the following situations apply:

  • You only take part in one semester (limited expenses)
  • You owe less than $50,000.
  • Your current job opportunities in another field may pay more than your expected salary after graduation.
  • You are comfortable with the idea of debt forgiveness as a way to minimize the financial cost of student loans.

Sometimes quitting school is the right decision. If you want personal advice instead of our general advice, find out how we help borrowers who owe more than $50,000 in student loans.

Have you ever thought about dropping out of college because of high debt? Comment below!

Frequently Asked Questions

Do you have to pay back student loans if you drop out?

If you drop out of school, you may have to pay back some or all of your student loans.

What happens to student loans if I withdraw from school?

If you withdraw from school, your student loans will be discharged.

Does student loan forgiveness include graduate school?

No, student loan forgiveness does not include graduate school.


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