When it comes to student loans, there is a lot of information to take in—especially for a new college student who is exploring their financing options for the first time, or a new graduate who has just started paying off their student loan debt. With all of the different information out there, it can be easy to get confused, and perhaps even misunderstand certain things about student loans. The following are some common student loan myths, debunked:
Myth #1: I’m not worried about my student loan debt, because I can just have some or all of my debt forgiven
Fact: It’s not easy to qualify for student loan forgiveness. The criteria can be rather strict, and you usually have to be working in a specific industry or you may be required to pay off a certain amount of student loan debt before the remainder can be forgiven. It’s not as simple as just being unable to afford to pay any of it back, and therefore it can be discharged. As such, students should always borrow money for their college expenses with the intentions of paying it all back.
Myth #2: I’m graduating soon and worried; I definitely won’t be able to afford the payments
Fact: Not all borrowers will be required to opt for a standard repayment schedule, although it may depend on the type of loan you took out. Government student loans usually provide several different options for borrowers who are struggling to make their student loan payments and are willing to help you out so that you don’t default. You can usually get your payments adjusted and lowered based on your income, so if you haven’t exactly reached the salary you were hoping for post-graduation, don’t fret. You may also be able to temporarily defer payments as well. However, you’ll want to consider the disadvantage of not opting for a standard repayment schedule. You are essentially lengthening your loan by delaying the inevitable, which means you’ll pay more interest in the end.
Myth #3: I can discharge my student loan debt through bankruptcy if I ever really need to
Fact: Not all debts can be discharged through bankruptcy, and typically, student loan debt falls into that category. That doesn’t mean it’s impossible, but isn’t as easy as discharging other types of debt, and you may not be eligible. As such, it’s important to not just assume that bankruptcy can be an automatic solution for any student loan debt troubles.
Myth #4: I probably don’t qualify for financial aid, so I should just take out student loans
Fact: Not necessarily. Many students qualify for some level of funding, and unlike student loans, financial aid usually doesn’t need to be paid back (there are some exceptions to this—for example, if you fail a class). It doesn’t cost anything to just apply and see what you’re eligible for. Even if you don’t receive enough financial aid to avoid student loans completely, every little bit helps, and that’s less you’ll need to borrow.
Myth #5: I’ll be required to borrow far more than I really need
Fact: The amount you’re offered might be a lot more money than you really need, but it doesn’t mean you need to accept the entire amount. Student loans are meant to help college students beyond tuition costs, and this money is meant to help cover other things as well, such as living expenses. If you don’t need the full amount, only borrow what you truly need. Otherwise, you’ll just be in that much more debt when you graduate.
Myth #6: Defaulting on my student loans won’t affect my credit
Fact: If you are missing student loan payments because you deferred your student loans, worked out a new repayment plan, or you had some (or all) of your debt forgiven, then your credit won’t be affected one way or another. However, if you significantly fall behind on your student loan payments, your credit score can go down significantly. It can be difficult (or impossible) to qualify for other types of loans, such as a car loan or mortgage.
Myth #7: All student loans are created the same, so it doesn’t matter what kind I choose
Fact: When it comes to financing college expenses, students have many options, and they should be carefully considered while weighing the pro and cons of each. Generally, students can choose between private loans or federal loans. Even after choosing between a federal or private loan, there are still other options to consider. For example, federal loans can usually be classified as subsidized loans or unsubsidized loans, which affect repayment term and interest rate. Subsidized loans allow borrowers to begin making payments after they graduate, and interest rates generally won’t exceed 6.8 percent. This type of loan also won’t accrue interest while you’re in school. Unsubsidized loans, on the other hand, require that borrowers pay all interest that was accrued while they were in school once they graduate. Other types of student loans include PLUS loans and Perkins Loans. If you need help deciding which type of student loan is best for you, speak with someone at your college’s financial aid department, who can also potentially help you find other options for paying for college (aside from student loans), such as scholarships and financial aid.
Are you overwhelmed by your student loan bills? If you need extra cash to catch up on or eliminate student loan debt once and for all, Peachtree Financial Solutions may be able to help. We can also help you receive your money sooner if you’re just starting college and looking for a way to pay for tuition, but without taking out a student loan. Contact Peachtree Financial Solutions today if you’re receiving structured settlement payments and would like to learn how you can turn those future payments into a lump sum of money. We will be happy to answer any questions you may have about the process, and we can also provide you with a completely free quote.
Nothing above is meant to provide financial, tax, or legal advice. You should meet with appropriate professionals for such services.