If you’re like most borrowers, you’ve probably spent a considerable amount of time getting informed on your student loans. After all, student loans not only impact your credit, they could also take a chunk out of your personal spending money for the next decade or more, depending on the types of loans you have.
To truly take control of your student debt, it’s important to separate fact from fiction. So, instead of navigating the pathways of misinformation and misconceptions alone, our student loan experts have prepared a list of the most common myths about student loans to help you stay on track.
Most student loans, and particularly federal student loans, allow you to finish school before you need to start repaying your debt. Yet, while it may not be necessary to repay your loans while you’re still in college, it’s a smart financial practice that many student loan experts recommend.
The great thing about paying down debt while you’re in school is that you usually don’t have to make full monthly payments. Just by putting a few dollars a month towards your balance, or chipping away at any interest that’s accruing on your loans, you can make a big difference on what you owe when you graduate.
The costs associated with getting a higher education can be astounding, meaning you could be on the hook for roughly $30,000 in student debt (the national average) by the time you’re ready to graduate. Yet, while the road to repayment may seem insurmountable, it might surprise you to learn that approximately 50 percent of borrowers qualify for some type of forgiveness of their debt.
If you’ve ever served in the U.S. armed forces or as a public servant, or you’ve worked as a teacher, nurse or first responder, you could be eligible for forgiveness programs tailored to your experience and/or profession. This also applies if you are thinking of joining these fields after you graduate, as long as you meet each program’s requirements.
Additionally, there’s also a forgiveness program for those who have experienced a total and permanent disability, and will ultimately wipe out your entire student loan balance if you qualify.
If you have student loans, there’s a good chance you have a fixed interest rate on your loans. This means that the interest – whether it’s currently accruing or not – will remain steady throughout the life of your loan until it’s paid off.
But does this mean you’re forced to make the same monthly payment for the next decade or more? The answer is no. Whether you have a high interest rate on your student loans or you’re wanting to look at your repayment options, there are a few ways you can tackle this common problem.
For one, refinancing your loans could give you a lower interest rate and extend your repayment period for up to 25-30 years. This will not only reduce your monthly payments due to the lowered interest, but spread these lesser payments out over a longer period. So, be sure to check out other repayment options that are available, which may suit your finances better as you embark on your new career.
Consolidation, too, is a great option if you’re interested in combining two or more student loans into a single monthly payment. During consolidation, the interest rates on your loans will usually be a weighted average of your current loans rounded to the nearest 0.8 percent interest. This not only simplifies repayment because it converts multiple payments to lenders into one single payment each month, but it can extend your repayment period as well, giving you more time to repay your loans.
Just like any type of debt, student loan debt does show up on your credit report. If you miss a payment or two, catching up won’t be too difficult. But if you continue to miss your payments and are unable to get caught up, it could have serious financial consequences.
Getting your student loan payments back in order doesn’t have to be a difficult process. Most lenders offer some form of student loan rehabilitation to help you recover, and will sometimes create a new borrower agreement that’s customized to your financial situation, while at the same time enabling you to get caught up on missed payments. If you fail to get caught up, however, you could go into student loan default.
Student loan default occurs when you’ve missed payments for more than nine months (270 days). This not only begins to impact your credit negatively, but could come with additional expenses that may include legal and financial assistance outside of your lender.
If you’re one of the millions of Americans who needs help getting out of default, it would be wise to start fixing the problem as soon as possible. Otherwise, your lender may have the power to garnish your wages until you either repay your student loans in full or work out a new agreement.
Student loans can be complex, especially when there are so many myths that confuse borrowers with misinformation. Get more facts about student loans by speaking with one of our student loan experts at (800) 771-6358 or by filling out our online form. We can help you find the best student loan repayment option for you – and get you on track for the rest of your financial future.