There is a lot of confusion around student loans. Some students swear that they will never take out a loan, while others cannot wait for the “free paycheck” to upgrade their computer and go to the party school of their dreams.
Student loans are not the financial devil, nor are they a free-ride. Take a look at these four common myths to make sure your student loans are helping you, not hurting you.
Myth #1: I Can Just Get a Full-Ride Scholarship
It is every college student’s dream to get a full-ride scholarship. Unfortunately, these scholarships are hard to get, and only a select few receive them each year. By all means, apply for as many scholarships as you can, and be happy with any reward money that you receive. Receiving two $500 local scholarships will help with the financial burden of college, even though you still may need $30,000 to complete your degree. The harsh reality is that while scholarships and savings are great, they do not always cover all of the college costs. This is where student loans come in.
Myth #2: I Need to Choose My Loan Before School Starts
You do not need to accept the first loan offer that comes your way, nor do you have to have a student loan secured for the rest of your college career. If you are unsure how much money you need to borrow, do not sign up for one until you have crunched the numbers. Also, know that as long as you meet the eligibility criteria, you can apply for a loan during any time during the school year. Before you apply, be sure to compare loans so you can find the one that best fits your needs.
Myth #3: It Doesn’t Matter What Type of Loan I Get
There are two different types of student loans, federal and private. Federal student loans are loans guaranteed by the federal government, while private student loans are secured through banks, credit unions, and even the university you are attending. Generally, private student loans have more restrictive terms and may have higher interest rates. Federal student loans are more likely to be waived or reduced for special circumstances, such as using your education degree to teach in a low-income area.
Myth #4: School Debt Repayment Will Be Impossible/Easy
Some student borrowers are overly optimistic when they sign up for a large loan amount. They assume they will land a high-paying job immediately after graduation, and will easily pay off their student loan. While having a high-paying job is a great aspiration, they could be putting themselves in a very difficult financial situation if their plan does not work out. Even if they are able to land a high-paying job straight out of college, being careless with loans could lead to over-paying those loans by thousands of dollars.
On the other hand, other student borrowers are hesitant to take out student loans out of fear that they will be in debt for the rest of their life. They feel that the loan repayment is impossible. Repaying loans is challenging, but with the right strategy, it is doable.
If you have to take out a student loan to pay for your college, it is not the end of the world. However, you do need to be educated about what a loan really involves to keep yourself out of financial hot water. Make sure you start by applying for scholarships and don’t forget to use our free student loan comparison tool when researching private student loans.