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.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.57% – 6.97%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.50% – 7.24%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|