9 Myths About Student Loans- Don’t Fall for it

9 Myths About Student Loans- Don’t Fall for it

9 Myths About Student Loans- Don’t Fall for it
Ashma Shrestha

Student loans can be a great way to help students afford quality education, but if chosen wisely, they can avoid becoming a liability. The correct information on student loans can help you make the right decision and save you a lot of money. 

However, it can be difficult to distinguish fact from fiction regarding student loans, as there is a lot of conflicting information on the internet. To help you make an informed decision, it's essential to understand the truth behind those common student loan myths.

Taking a student loan from a bank or financial aid centre can be necessary for many students to afford their education. Still, it can also come with a heavy burden of repayment. It's essential for students to fully understand the terms and conditions of a loan before applying and not be swayed by misconceptions or myths about student loans. 

In this blog, we have discussed some common myths about student loans and provided the truth behind them.

Myths about Student Loans

Myth#1 You will never be able to pay off your loan

Many students are discouraged from applying for financial help because they believe they will never be able to pay off their loans, which is a common fallacy. This is untrue, though. Although student loans might cost a lot of money, there are numerous ways for graduates to pay them down. These consist of loan forgiveness initiatives, income-driven repayment arrangements, and the choice to refinance your debt. 

Many lenders also provide flexible repayment choices, such as temporarily putting off payments in the event of financial difficulty. Before taking on student loan debt, you must do your homework and comprehend your possibilities.

Myth#2 You can borrow massive amounts of student loan

The widespread misconception that student loans do not need to be returned may cause students to put off taking care of their debt. However, it is crucial to be aware of the financial repercussions of taking out a loan and to make the necessary preparations. This involves taking the price of the education into account and seeking ways to cut costs, such as submitting a scholarship application or enrolling in a school with lower tuition. Students should also be careful not to borrow more money than they can afford to pay back, especially if private financial assistance offices allow them to do so.

Estimating the whole expense of your university degree, including attendance, fees, and other charges like housing and living expenses, is essential when applying for a student loan, especially if you're studying abroad. This will enable you to calculate the amount you need to spend so you can obtain a loan that you can comfortably repay. To avoid taking on more debt than is required, apply for a loan for the exact amount you need.

Myth#3 Lower interest is always better

Although it is generally preferred to have low-interest rates on student loans, it is common to believe that lower rates are always better for you. When making your choice, consider the loan repayment time, even though lower rates might cut the overall cost of payments. 

While you are still in college, it could be challenging to repay the money quickly with a low-interest rate. As a result, while interest rates should be considered, they shouldn't be the sole when choosing a student loan. The length of the loan payback period and your general financial status are also vital considerations.

Myth#4 Your academic record only backs loan eligibility 

It's a widespread misperception that the only factors determining your eligibility for a student loan are your GPA and the presence of collateral. There are additional variables that lenders consider when considering your application, even while a tremendous academic record and collateral can undoubtedly boost the likelihood that your loan application will be approved.

Your credit score is a crucial component that lenders take into account. A high credit score might show lenders that you are a responsible borrower with a history of on-time debt repayment.

Your potential for future earnings is a critical consideration that lenders consider. If the borrower has the potential to repay the loans with their future wages after graduation, many lenders are ready to give student loans without collateral. This is because they think there's a good possibility the kid will graduate with a well-paying job.

Myth#5 You have to start paying back your student loans right after graduation 

The idea that you must repay your student debts as soon as you graduate is untrue. Before you are obligated to begin making payments on many student loans, especially federal student loans, you have a grace period of six months after graduating. Before repaying their debts, this grace period gives students time to settle into adult life and find employment.

It is important to remember that some loans may accrue interest during this grace period. This interest will be added to the loan's principal balance, increasing the total amount that must be repaid.

Many student loans have a grace period of six months following graduation before you must begin making payments. Still, it is crucial to comprehend your particular loan's conditions and prepare to follow them.

Myth#6 You can't change your repayment plan

It is a myth that once you have chosen a repayment plan for your student loan, you cannot change it. There are a variety of repayment plans available, and you can change your plan if your financial situation changes.

For example, if you lose your job or have a significant reduction in income, you may be eligible for an income-driven repayment plan. These plans will base your monthly payments on your income and family size and are designed to make student loan payments more affordable for borrowers with lower incomes.

Myth#7 You can't get a student loan if you have bad credit

The idea that people with poor credit cannot obtain college loans is untrue. While it is true that having high praise can make it simpler to get a loan, not all student loans require it.

Applying for federal student loans, which do not run a credit check, is an alternative for students with poor credit. Direct Subsidized and Unsubsidized Loans and Direct PLUS Loans are among these loans.

Applying for a private student loan with a co-signer who has strong credit is an additional choice. Someone who co-signs for your debt assumes responsibility if you cannot make payments. You may have a better chance of getting a loan authorised and a reduced interest rate if you have a co-signer with solid credit.

Myth#8 If you don't use all the loan money, you have to pay it back

The idea that you must repay the entire loan you receive if you use it only some is a misconception. The truth is that you only need to refund the money you used to cover your educational costs.

For instance, if you get a loan for $10,000 but only use $8,000 for fees, books, and other educational costs, you will only be required to repay the remaining $8,000 of the loan.

It's vital to remember that you should only borrow what you need and only utilise the money for educational expenditures. Over-borrowing might result in excessive debt and make loan repayment more challenging.

Myth#9 Rely on Loan Services for Advice

Loan services and their advisors should be relied upon for all financial decisions regarding student loans. It is important to remember that the ultimate responsibility for repaying student loans lies with the borrower. While loan services and their advisors can provide suggestions, it's essential to make informed decisions and have your approach to managing your finances. 

Be cautious when loan services offer more help and lend more money, as it may seem appealing in the short term but can become a burden in a long time. Always consider all options and seek advice from trusted sources before making a final decision.

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