What happens when you run out of money for college (and how you can avoid it)

By Sarah Netter | Published on March 9, 2026

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Alicia Graves was already walking a financial tightrope to afford college when a severe illness led to her losing her merit scholarship, forcing her to drop most of her classes.

“When I lost my merit award, my adviser from my journalism class helped pay for me to take a few terms of only two classes out of her own pocket,” said Graves, a freelance journalist and photographer from Oregon, adding that the stress of managing school finances caused many sleepless nights.

“At times, I had no idea if I’d have enough gas to make it to my classes. I had to watch how much my food cost,” she said. “There was a couple of months where my power was shut off and I had to come up with the funds to get it turned back on.”

Graves, who went on to complete her associate’s degree in 2022 and has plans to pursue a bachelor’s degree in the future, is one of the millions of American college students who have had to drop classes or postpone a degree for financial reasons. It took her three years to complete a two-year program.

The high cost of tuition, a generation faced with crushing student loan debt, and a cap on federal borrowing has left many students scrambling to secure any type of funding that will keep them in school, or simply dropping out without a degree.

Financial aid no longer enough for some students

The financial barriers go way beyond just being able to afford the tuition, which currently averages $198,616 for an in-person degree at a private university, $10,940 per year for in-state students at a public university and $26,290 per year for out-of-state students.

Jay Murray is the president and founder of Solutions for Tuition, a Colorado-based college funding firm that has worked with thousands of students all over the country.

“We are seeing an increase in the number of students who are starting to really drill down into the funding process and figure out how they’re going to pay for this,” he said. That means researching every opportunity from scholarships to private student loans. “Even the lending space is becoming more and more competitive.”

It’s just not getting into college, it’s completing the degree that’s paramount, especially when it comes time to job hunt.

The median weekly earnings for an employee with a bachelor’s degree is $1,541, according to the Bureau of Labor Statistics, compared to $1,057 for someone who has some college education, but no degree.

“In this day and age of automated employment applications, often prospective employers are inundated with resumes,” he said. “In that situation, let’s say an employer has four job openings and they receive 4,000 applications. Oftentimes the first cut is, let’s eliminate someone that doesn’t have a bachelor’s degree.”

Graves considers herself fortunate. Just before the final year of her program, she received four scholarships through her college’s foundation that allowed her to complete her degree.

“The total,” she said, “ was enough to cover my entire year.”

Where to find financial help

There are several financial aid options to investigate if you are faced with dropping classes or, worse, dropping out entirely. Here’s what is recommended:

Always fill out the FAFSA

Even if you think you won’t qualify or if you think you won’t need it, always fill out the Free Application for Federal Student Aid (FAFSA) from the US Department of Education. Forgoing those forms, Murray said, can send a message to your school’s financial aid office that you have the college savings you need, making any type of financial help next to impossible.

“There’s an inherent belief that if you don’t fill out the financial aid forms,” Murray said, “[you] don’t have financial need.” Gift aid with the FAFSA is free money for college expenses, students should max out their federal aid each year.

You will also need to fill out the FAFSA to apply for any federal student loans, work-study or Parent Plus loans. These loan options have a set interest rate that isn’t based on your credit score and can be a great option for students.

Talk to the financial aid office if you are struggling to pay college costs

You never know what scholarships might be available that you don’t know about or other aid packages that can help you save money.

“Colleges, when faced with losing the students, may help them,” Murray said. “They don’t want to lose a student in the middle of their college career, because it affects their graduation rates and because they genuinely care about their students.”

When Graves spoke up about her own financial struggles, she found out there was a fund to help students pay their education expenses.

“Think outside the box,” she said. “I was lucky in having a wonderfully supportive team and an adviser who were willing to help me out. But a lot of that was because I was willing to talk about what was going on. I didn’t know there was a fund to help out with bills until I said something about my needs.”

Sign up for a work-study program

Work-study jobs can have benefits far beyond a paycheck. “Properly used, it can allow the student to create relationships that might lead to further opportunities,” Murray said. “It allows the student to demonstrate that they’re willing to work. Oftentimes, if the student is likable, the people in the department will go out of their way to help them.”

Becoming a resident assistant, or RA, he added is “the mother of all scholarships,” since it covers room and board which can easily run between $10,000 and $20,000, and it looks great on your first resume.

There are several other ways to earn money or be awarded extra funding

Ask your financial aid office and scour the internet for mid-degree scholarships. There are plenty to go around, Murray said. Consider an off-campus side hustle or a part-time job that won’t interfere with your studies. Sign up for the ROTC if you are interested in the military option.

Graves is hopeful that something will change so that all students can get a fair chance at graduating with a degree. “I truly believe that unless something changes in the near future, college will be less obtainable for many.”

Using private student loans to stay enrolled when other funds run out

If you’ve exhausted your savings, scholarships, and federal aid, private student loans can be a lifeline to help you continue your education. Private loans, offered by banks, credit unions, and online lenders like Earnest, allow students to cover remaining tuition and related costs when other sources of funding have run dry.

Unlike federal student loans, which are set at a fixed rate by the government, private loans typically come with either fixed or variable interest rates, depending on your creditworthiness and the terms of the lender.

While they can offer higher borrowing limits than federal loans, private student loans also tend to have fewer protections, such as deferment or income-driven repayment plans, making it crucial to weigh the long-term impact of borrowing.

To apply, you will often need a strong credit score or a cosigner with solid financial standing to secure the best rates. Borrowers with limited credit may see higher interest rates, but shopping around and comparing offers can help you find a manageable loan.

Keep in mind that private loans should be viewed as a last resort after maxing out federal loan options, as federal loans offer more borrower protections, such as loan forgiveness programs and more flexible repayment terms.

Exploring private student loans can help you stay enrolled and continue your education, but it's important to borrow responsibly, ensuring that you only take out what you need to avoid overwhelming debt after graduation.

Explore more student loan options with Earnest

When other funding sources fall short, private student loans can help you stay on track to achieve your educational goals. If you’re considering this option, it's important to find a lender that offers competitive rates and flexible repayment terms. Earnest provides personalized loan options that can help cover your tuition and other school-related expenses. Explore their student loan offerings to see how they can support your path to graduation.

About the Author

Sarah Netter

Sarah Netter is a writer whose work has appeared in The New York Times, The Washington Post, and ABC News.

Disclaimer

The opinions expressed by the interview subjects are not necessarily those of Earnest. This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.

1 Before applying for private student loans, it’s best to maximize your other sources of financial aid first. It's recommended to use a 3-step approach to assembling the funds you need: 1) Look for funds you don’t have to pay back, like scholarships, grants, and work-study opportunities. 2) Next, fill out a FAFSA(R) form to apply for federal student loans. Federal Direct subsidized and unsubsidized loans, excluding PLUS Loan for Parents and PLUS Loan for Graduate and Professional Students which require a credit check and a credit worthy endorser if the parent or graduate or professional student has adverse credit, do not require a credit check or cosigner, and offer various protections if you're struggling with your payments. 3) Finally, consider a private student loan to cover any difference between your total cost of attendance and the amount not covered in steps 1 and 2. For more information, visit the Department of Education website at https://studentaid.gov/.