Nov 09, 2016 09:06 AM EST
Student Loan Myths You Should Know About
Understanding student loans can be daunting. However, if you already have a loan or are planning to get one, it's always good to be educated on what it actually is.
It was previously reported that the price of higher education has drastically evolved in the recent years. Whereas your parents may have been able to graduate without much debt, it's unrealistic to expect today's generation to pay the same way decades ago.
Justin Draeger, president of the National Association of Student Financial Aid Administrators, advised college students to take on a reasonable amount in federal loans, which is no more than their expected first year's salary.
USA Today College shared four common myths about student loan. Students should be aware of these myths and the truth behind it.
1. Student loan forgiveness is only given to people who work in public service.
There are other ways for your federal loan debt to be wiped out. It's not just through Public Service Loan Forgiveness.
Signing up for one of those income-driven repayment plans, such as the Revised Pay As You Earn program, can help as well. It is available for all federal loan borrowers.
2. Repaying student loans should be top priority.
This is not always the case. Debt which has a higher interest rate than your student loans should be tackled first because it will cost you more money.
Moreover, getting out of debt is only a portion of financial security. It is best to save for both your long-term and short-term goals.
3. Consolidation is the best way for student loans.
Consolidation was just a way for graduates to simplify their monthly payments. However, this is no longer necessary for students who have their federal loans with the same servicer. Currently, this method is useful as a qualification for Public Service Loan Forgiveness or income-driven repayment loans.
4. Your student loan's interest rates will always be the same.
There are ways to lower your interest rates. One of the ways to rein in long-term costs is through student loan refinancing. Refinancing federal loans through a private lender may not be a good idea, though, since you would need to give up federal borrower protections.
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