Myths

9 Student Loan Repayment Myths Debunked

Students believe in many myths that could be contributing to student loan default rates. In fact, chances are good you’ve heard one or all of the following statements come out of your student’s mouths. If you do, provide the handy responses we’ve detailed here to clear up confusion and reduce the chance they’ll default.

1. I’ll Never Pay Off My Loans

You will … it might just take time. Find a repayment plan that works for you, if necessary. If you’re not having trouble repaying your loans, great. Talk to your lender about upping monthly payments so you can repay the principal amount faster.

2. Lenders Won’t Budge

Actually, most lenders would much rather hear you’re having trouble making payments so they can help you work out a plan than have to hunt you down when you default. Call sooner rather than later to avoid bigger trouble.

3. My Alma Mater Doesn’t Care

Your college or university will always be here to help you navigate student loan repayments, explain your options and help advocate for you. All you have to do is ask.

4. Student Loan Forgiveness Will Save Me

Maybe not. Student loan forgiveness is premised on the idea that if you faithfully make payments for a number of years (often 20), your debt will be wiped. This table demonstrates the likelihood you’ll have outstanding debt when your term is up; as you can see, it’s not much. The takeaway? Don’t worry too much, and make your payments on time; at worst you’ll pay everything off yourself. Congrats!

5. Loan Consolidation Is the Only Way to Go

You don’t necessarily need to consolidate your loans, and it’s impossible to merge federal and private. Plus, you may lose FEEL and Perkins benefits if you do so. Talk to your lender to see if this will really help you.

6. Bankruptcy Can Get Me Off the Hook

Chances actually aren’t that good of unloading student loan debt through Chapter 7 or Chapter 13 bankruptcy. If you meet the Brunner test (which states that repaying loans would cause undue hardship, you’re unlikely to be able to repay them a soon, and you’ve made a good-faith effort already) you may be able to discharge your loans, but otherwise you’re probably stuck.

7. I’ll Be Charged If I Consolidate or Change Repayment Plans

Different repayment plans may work best for you at different times of your life, and consolidating can reduce your overall payment and make it easier to keep your ducks in a row. You will never be charged for either if you use a reputable servicer.

8. Income-Based Repayment Is Always Better

Not so. If you have trouble repaying your student loans, then income-based repayment and other repayment plans can be a lifesaver. However, if you’re not having trouble making monthly payments, then alternative repayment plans may just lengthen the repayment term and up your interest, increasing the amount you pay overall.

9. Public-Service Loan Forgiveness Is Instantaneous

Nope. You have to make 120 qualifying payments first, not to mention stick with a public service job the entire time – only then are loans forgiven. This is a great way to reduce what you owe in the long run, but only if that job is something you really want to do.

Doing your best to disseminate true information will help students, help your school, help the economy and help the nation. Luckily, countering false beliefs isn’t that hard once you have the necessary information, so get started myth-busting and default-reducing today!