Myths about student loans you shouldn’t believe
Updated on July 11, 2019
Whether you’re just taking out your first student loans or have been paying existing ones off for several years, you have likely heard a variety of myths about student loans. Sometimes myths are true, but more often than not, they are just confusing and can lead you to make uninformed decisions about student loans. Here are some of the biggest myths about student loans you shouldn’t believe.
Income based repayment plans can’t affect your credit
Switching to an income based repayment plan is a good way to manage your payments if you have limited financial resources. However, there’s a common misconception that these plans are a get out of jail free card if you are struggling financially. However, it’s incredibly important that you still make your payments on time. If you miss payments, it could negatively affect your credit and drive up your interest rates.
You should always consolidate or refinance your student loans
Another common myth is that loan consolidation and refinancing is always the right step. While it can often be beneficial, it’s not the right step for everyone. It’s important to know the difference between them – consolidation combines your student loans with other debt for one easy payment, while refinancing can get you a lower rate or a longer repayment plan. It’s important to remember that if you refinance a federal student loan, you are no longer eligible for income based repayment plans. It’s also important to weigh your options if you are consolidating and make sure you are benefiting financially in the long run.
You can always get student loan forgiveness
Many people treat student loan forgiveness like an easy last resort if things go wrong. However, it’s important to remember that only federal student loans qualify for forgiveness, and if you do take forgiveness on these loans, you will be charged income tax on the amount that you were forgiven. If you take out private loans, you should always keep in mind that they do not qualify for student loan forgiveness.
When taking out or repaying student loans, you should always go straight to the source and ask your loan provider any questions you might have. Student loans can be very expensive, and it’s important to get the correct information so you don’t end up overpaying.