Can You Go Back to College If You Owe on Your Student Loan? (2024)

FAQs

Can You Go Back to College If You Owe on Your Student Loan? ›

If you still owe money on your student loans but haven't yet defaulted, you may return to school at any time. However, you'll need to avoid over-leveraging yourself. If you take out too many student loans at once, you may expose yourself to higher interest rates.

You can go back to school. Still, you should take stock of how much you owe. If you have a lot of debt, consider paying some of it down before you head back to school—too much existing debt could mean higher interest rates on a new loan. You also might not qualify for some federally subsidized loans.

You'll still be able to submit the FAFSA and access federal grants, work-study and student loans for college or graduate school. However, it may not be a good idea to take on more debt when you're already behind on your student loan payments, and private loan default is still a difficult situation.

Colleges typically do not release transcripts if a student still owes money. So this will probably prohibit you from earning a degree elsewhere. What you may be able to do, however, is to work out a payment plan with your old school which will allow your transcript to be released, even if you haven't paid in full yet.

Public and private colleges in most states can withhold your academic transcripts if you have an unpaid balance of any amount, or if you've defaulted on a student loan.

You'll need to get out of default before you can receive federal student aid again.

Yes, you do have limited rights in this situation. The federal Family Educational Rights and Privacy Act (FERPA) gives you the right to review and inspect your school transcripts even if you owe money to the school. These may be unofficial transcripts, which are different from official transcripts.

Student loan default, which occurs after 270 days of missed payments on federal student loans, typically makes you ineligible for federal student aid. That means borrowers in default can't access the grants, work-study programs and student loans that help make college affordable.

Do student loans go away after 7 years? While negative information about your student loans may disappear from your credit reports after seven years, the student loans will remain on your credit reports — and in your life — until you pay them off.

The Fresh Start program is open to any taxpayer who owes taxes and is struggling to pay them. There are no income requirements. The first step in applying for the IRS Fresh Start program is to complete our contact form, contact your tax attorneys, or contact your accountants to see if you qualify.

What happens if you never pay college debt? ›

Failing to pay your student loan within 90 days classifies the debt as delinquent, which means your credit rating will take a hit. After 270 days, the student loan is in default and may then be transferred to a collection agency. Keeping up with your student loan payments helps improve your credit score.

If you work full time for a government or nonprofit organization, you may qualify for forgiveness of the entire remaining balance of your Direct Loans after you've made 120 qualifying payments—i.e., 10 years of payments. To benefit from PSLF, you need to repay your federal student loans under an IDR plan.

The proposal would permit student debt forgiveness for borrowers with only undergraduate debt if they first entered repayment at least 20 years ago (on or before July 1, 2005), and borrowers with any graduate school debt would qualify if they first entered repayment 25 or more years ago (on or before July 1, 2000).

Public colleges should seek an opinion from the state attorney general, as they may be prohibited from withholding transcripts on constitutional grounds. In many cases, however, state law permits colleges to withhold academic transcripts for failure to fulfill financial obligations except in cases involving bankruptcy.

If collections aren't resolved and the amount owed paid, your school may choose to take legal action. You'll need to hire a lawyer to defend you or run the risk of a default judgment. A civil judgment against you won't appear on your credit report or affect your credit score.

Thankfully, new laws passed over the last two years have banned transcript withholding in eleven states: New York, California, Colorado, Maine, Minnesota, Washington, Ohio, Illinois, Indiana, Connecticut and Oregon. Nine more states have considered bans, but have yet to pass proposed laws.

Automatic In-School Deferment

If you're enrolled in an eligible college or career school at least half-time, in most cases your loan will be placed into a deferment automatically. If you enroll at least half-time but do not automatically receive a deferment, you should contact the school where you are enrolled.

If the loan is paid in full, the default will remain on your credit report for seven years following the final payment date, but your report will reflect a zero balance. If you rehabilitate your loan, the default will be removed from your credit report.

Apply for grants

Like scholarships, grants are obligation-free awards that don't require repayment. The biggest difference between grants and scholarships is that grants typically come from the state or federal government. Most grants are awarded based on financial need.

It's up for you to decide the balance between investing in a degree for yourself and paying off your debt, but the bottom line is that you should do both, in Ramsey's view, as long as you can finance all of these things out of your free cash flow and not dig yourself into an even bigger hole.