When it comes to your student loans, you need to make sure that you are completely informed about them. There are tons of student loan myths that circulate, and you have to be sure that you don’t buy into them.
If you start to believe all of these student loan myths, then you may find yourself in a pickle when it comes time to repay your loans. Below are some of the common myths that you need to ignore when you start to consider student loans.
Student Loan Myths You Might Want to Ignore
1. You Can Have Your Loans Discharged in Bankruptcy Court
If you are having trouble paying back your student loans or refinancing student loans, it is important NOT to assume that your loans can simply be discharged in bankruptcy. Whether your parents, friends, or sketchy website told you that this is possible, it is highly unlikely.
In fact, you have to pass what is called the Brunner test first and it is not always guaranteed that your student loans will be discharged. If you borrowed the money, you should expect to pay it back.
2. You Cannot Pay Your Student Loans in School
This is not entirely correct. You can wait until you graduate to pay off your federal student loans, but you are able to make the interest payments while you are in school. If you took out a private student loan, you may have to pay the loan back while you are attending school depending on the lender.
3. Student Loans Don’t Affect Your Credit Score
Student loans do have a considerable affect your credit score. While the student loan itself does not weigh as heavily when other companies are looking at your credit score, you can damage your rating if you stop paying your loans. If you make late payments or allow your loans to go into default, your credit score will definitely reflect it.
4. Your Student Loans Will Cover Everything
Wrong. Depending on the cost of attendance at your college, your student loans may not cover the entire cost of tuition and books. In fact, some students have to pay some of their tuition out of pocket or they may need to take out additional loans to cover the cost of their schooling. You should always evaluate how much money you need BEFORE you start taking out loans.
5. You Can Pay Your Student Loans with a Credit Card
Yes and no. The vast majority of lenders only accept electronic payments via ACH. While it might be possible, this article suggests that most lenders will be unwilling to accept payment via a credit card, as it will cost them more money. The lender would be highly unlikely to accept a credit card payment unless you are seriously behind in the repayment of your debt.
6. It’s Impossible to Pay Off Student Loans
Many people think that it is impossible to pay off their student loans once they have received them, but it is not impossible. In fact, with a little hard work and dedication, you can pay them off.
First, you will need to have a budget in place and you will need to be dedicated to send any additional money you earn to your loan’s balance. The typical repayment period is 10 years, but it can be more or less depending on whether or not you change your repayment plan, and how hard you work towards it.
7. Private Loans Are the Best Way to Go
Some people believe that private loans are the only way to go, but before you simply settle on them, it is important to explore all of your options including federal loans. Often, federal loans are a better choice for students because you receive additional benefits that you would not receive private loans.
For example, with federal student loans, you have a grace period of six months from the time you graduate or stop going to school until you have to begin repayment; whereas many private student loans, you often have to make payments toward the loan while you are still in school.
You should weigh the pros and cons of both federal and private loans BEFORE you choose to just go through with one or the other. You might also want to check out the great guide by CreditDonkey on how to getting rid of your student loans once and for all.
Student loans are a great option when you cannot afford to pay for all of your education. Federal and private loans are available to students, but you may find that one option is better. The above myths are just that—myths—and you should consider them carefully before you believe them.
If you are interested in obtaining student loans for your schooling, contact your financial aid counselor to discuss your options.