What Happens to My Loan If I Drop Out?

University isn’t for everyone and some students find that they just don’t enjoy the university experience as much as they thought they would. In other cases, circumstances outside of their control mean that staying at university just isn’t possible.

However, if you’ve dropped out of university, or you’re considering dropping out of university, then you’ll need to think carefully about your finances – particularly if you’ve taken out a student loan or received a bursary.

The financial help and responsibilities you may have as a student could include:

  • A tuition fee loan from the Student Loans Company (SLC)
  • A maintenance loan from the SLC
  • Further maintenance funds from your university
  • Further maintenance funds from your Local Education Authority (LEA)
  • An tenancy agreement/contract with your university or private landlord

How will dropping out of university affect the funds I receive?

If you drop out of university you need to inform any organisations that you receive money from as soon as possible.

For tuition fee loans and maintenance loans from the SLC you’ll only start repaying your loan when you earn over £27,295.

However, if there is any overlap between the amount you received and the amount you were actually entitled to, you can be asked to pay it back at any time.

If you are receiving funding from your LEA then you’ll only be entitled to funding when you’re actually attending lectures. This means that if you stopped attending university before you dropped out, you’ll need to pay back the fund you received when you weren’t entitled to them.

How do I work out how much I have to pay back to the LEA?

Entitlement to funds from your LEA runs from 1st September to 31st August the following year.

Therefore, you’ll need to do the following maths to figure out how much you need to repay if you drop out before the end of your course:

  • Work out the number of days between 1st September and the last date you attended university
  • Multiply that by the amount of funding you’re entitled to
  • Divide this number by 365 (or 366 in a leap year)

The number you are left with is the amount of money you’re entitled to keep, but the rest must be paid back. 

What about funds from my university?

As well as a student loan and LEA funding, many students are also entitled to bursaries from their university.

The majority of these bursaries are non-repayable, but if you drop out of university you might be required to pay them back. As a general rule you don’t have to pay back funds for completed terms, but if you drop out in the middle of term you may need to pay those funds back.

Course fees

The majority of students get a tuition fee loan from the SLC to cover the cost of university courses and you won’t need to pay back that loan until you’re earning over a certain amount.

However, in order to be entitled to the loan you’ll need to attend university for three months after the course start date. If you drop out before the three month cut off period then the university may ask you to pay fees for the time you attend.

Be aware that because you won’t meet the loan entitlement you’ll need to pay for this out of your own pocket.

Accommodation costs

Whether you’re living in university halls or renting from a private landlord you’ll have signed a contract. With university accommodation your contract will usually be for the entire year and therefore you’ll need to pay these fees regardless of when you drop out.

If you’re renting from a private landlord you may have more leniency, as the landlord may give you the option of finding someone to take over your tenancy for the rest of the year. However, always read contract small prints thoroughly before signing, as your landlord might not give you the option to do this and you could need to pay for the entire year, even if you aren’t living there.

Do I have to pay everything back at the same time?

With loans from the SLC, your LEA, and your university you’ll usually be given the option to pay back any money you owe in monthly instalments.

If you owe money to a private landlord then they may want the entire payment in one go, although they may also let you pay the rent, and any other money you owe, in monthly instalments.