Does It Make Financial Sense to Drop out of College?

If you’re currently in college and accumulating a lot of debt, you might wonder whether it could be better on your wallet just to drop out. After all, on average, the college creates about $7,100 in debt every year you’re in it – wouldn’t it be better to stop at $14,200 in debt rather than accumulate $28,400 in debt by staying in college for four years?

Although this might seem to make sense, it actually doesn’t. Dropping out of college can actually lead to a worsening financial situation, and many people who drop out actually take longer to pay off their debts. Here’s what you need to know about the problems you might face with student debt after dropping out.

How Long Will It Take to Pay Off Student Debt If You Don’t Graduate College? Created By:  OneClass

Issues With Job Income

One of the most prominent concerns is job income. Specifically, the problem is that those with an associate degree make an almost negligent amount more than those who only have some college experience: $44,823 for associate degrees versus $41,704 for those with some college experience.

However, upon completing a bachelor’s degree, that number shoots up 49% to a median income of $62,296. Completing four years at college can dramatically increase your eventual income. That can set you up for better success both with your loans and further on in life.

Problems With Interest

Interest is typically going to be one of the things that really bring you down for any loan. That includes college loans. Consider a college loan at 4.66% interest. If you have that lower job income, you’re likely going to make very low monthly payments, going almost exclusively toward interest. That’s probably why, 12 years after starting college, those who dropped out still owe 84% of their loan on average.

Those who graduated, however, have 58% of their student loans paid off 12 years after starting college. Although this is better than the other group, it’s still pretty dramatic. This is one of the reasons you should do a lot of research before you start your college experience; no matter which group you end up being in, you’re probably going to spend decades paying off your loans.

Concerns Regarding Other Financial Elements in Your Life

When you have a degree, banks are going to be much more likely to trust you with money. Whether that’s reducing your loan’s interest rate through refinancing or providing you with a loan to buy a home, banks prefer people with a college education.

This can significantly help people who were able to get through all four years of college while also making things much more difficult for people who weren’t. If you can, look for as many tools and options as possible to get through college completely, as it’ll set you up in more ways than one.

Conclusion

Even though you end up with less debt if you choose to drop out of school, you’re probably going to pay it off for longer, pay more interest, and have lower income over time. That makes dropping out of school a bad decision financially. If you’re having a hard time with your school education, it’s probably a good idea to look into third-party resources rather than considering dropping out.