Student Loan Myths that Are Costing You Money

Student loan debt is the largest type of debt held by Americans, following mortgages. And for some, they are not only a source of pressure but an area where inaccurate information can be costly. In 2018, about 44 million U.S. residents owe nearly 41.5 trillion in student loan debt. That’s a lot of education!

The millennial generation often feels chained to their student loans and considers them an obstacle in purchasing a first-time home. Other generations, like baby boomers, are creating student loan debt later in life as they scramble to remain competitive in the job market by getting new degrees at advanced ages. As mature workers take on new student loan debt, they need to make sure the jobs they will be hired for can sustain repayment of the debt. You need to separate fact from fiction when it comes to student loan debt and learn how to get a handle on it and your budget.

5 Myths that Are Costing You Money

There are many myths surrounding student loans. These are the top five, along with the reality of each one, according to a survey by Student Loan Hero:

  1. Your interest rate is set in stone

Your student loan interest rate is not set in stone. You can refinance to access a lower interest rate. Of course, you want to have a good credit score and be in good standing with your loan repayments.

  1. Paying loans off early will carry penalties

You can make larger monthly payments toward the principal of your loan without being penalized. This will shorten the number of years it will take to pay the loan down.

  1. Consolidating your loans is the best way to lower your interest rate

You are not able to combine federal and private loans through federal consolidation to save on interest. If you have only federal direct loans, you will automatically receive combined billing and have only one payment to make.

  1. Income-based repayment plans won’t affect your credit

While income-based repayment plans usually help to lower your monthly student loan payment, you will still be charged an interest rate dependent upon your credit and approval for the plan. It can potentially have a negative impact on your credit score and prevent you from applying for other loans.

  1. Private loans are eligible for the Public Service Loan Forgiveness program

Public Service Loan Forgiveness doesn’t happen until a student signs up for one of five repayment plans and has already made 120 qualified payments. It does not happen when you begin a public service job.

 

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