So you’re at the point now where it’s time to pay back your student loans. As you’re researching the best repayment plans, this is the time to be wary of various student loan myths and other bad advice out there.
We all know misinformation can be dangerous. So make sure you understand the ins-and-outs of how to properly manage your finances and student loan debt by not falling for these student loan myths.
1. You don’t need to worry about paying student loans in school
A big mistake a lot of borrowers make is blindly taking out student loans without considering the impact it will have on future payment or career choices.
It’s important to minimize the amount of debt you take on while in school by keeping your student loan balance in check. Living frugally as a college student is usually the key to making this happen.
However, if your spending is out of control as a college student, you’ll end up continuing to live as a frugal college student long after graduation.
Don’t view student loans as an extension of your income. Instead, remember that they’re an investment in your future that you’ll eventually have to pay back, with interest.
2. Income-based repayment plans won’t affect your credit
Income-based repayment (IBR) plans are usually a favorable option for lowering your monthly student loan payments. They give borrowers a chance to better manage their student loans by applying for new repayment plans based on income and family size.
Although an IBR plan helps reduce your monthly payments, you’ll still be charged an interest rate depending on your credit and approval for the plan. Plan on making regular payments that are enough to cover the interest charges. Otherwise, you’ll end up going further into debt.
What’s more, taking on more debt while not paying off your current debt load can negatively impact your credit score. A high debt-to-income ratio can cause your credit score to decrease and prevent you from applying for other loans, or receiving better interest rates.
3. Refinancing your student loans is always a good idea
Student loan refinancing is a great way to negotiate a lower interest rate, a longer payment schedule, or both. It can also help make your loan payments easier to manage.
Although refinancing private student loans is nearly always beneficial, you’ll want to be careful about refinancing federal student loans.
When Federal student loans go through the refinancing process, they’re converted into private student loans and are no longer eligible for other income-based repayment plans. And depending on the various types of student loans you have, there are specific repayment plans that can help you better afford your monthly payment.
Since federal student loans are treated differently than private student loans, it’s a good idea to talk to an expert before choosing to refinance any type of student loans.
4. Lawyers always know the proper steps
There aren’t as many lawyers who understand the ins-and-outs of dealing with student loans as you may think.
According to consumer debt expert Steve Rhode in The Huffington Post, some lawyers are never taught about student loan management in school. Nor are they trained or have the skills to properly delve out advice for dealing with them.
If you do need to hire a lawyer, either because you’re behind on payments and your wages are being garnished, or you’re thinking of filing for bankruptcy, know that not all lawyers are created equal.
5. Student loan payments will be with you until you retire
For most student loan borrowers, the amount of their debt can be overwhelming and stressful. It may seem like you’ll never be able to work your way out of debt, or you’ll be close to retiring before you make your final payment.
Don’t despair! While that mountain of debt you have after graduating college may seem insurmountable, you have options. Some of these options include IBR plans, refinancing, and debt consolidation.
For example, this couple in their early thirties paid off over $80,000 of student loan debt by teaming up together and working hard at it for 3 years. And even if you have hundreds of thousands of dollars of student loan debt, don’t get discouraged. Blake was able to pay off $380,000 of debt in 21 months and is now a successful dentist.
To pay off your student loans faster, consider taking on overtime at your day job, starting a business on the side or working odd jobs on the weekend. This will help you out more funds towards your student loan debt.
Pinpointing common student loan myths and bad advice
If you find that you’re unsure of the advice you’re being given:
- Seek out help from experts, experienced friends and colleagues
- Get a well-rounded view of how student loans work
- Consider all of your refinancing and repayment options
- Do research online to bust common student loan myths
- Reach out to your financial aid office to connect with trained experts
Additionally, there are other student loan-focused startups, SoFi and Earnest, who are busting these student loan myths. They specialize in helping college graduates, just like you, refinance and consolidate student loans. They can give you custom financial advice related to your situation.
In this technology age, there are a lot more easily accessible tools to help manage your student loan debt. So don’t fall prey to these common student loan myths. Instead, kick them to the curb and take control of your student loan situation by utilizing the best advice available to you.
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