Student Loan Myths Busted!
A recent LendEDU survey of more than 500 college students showed some troubling misconceptions about how student loans work — from the length of repayment plans to what happens if you cannot pay. With so much information and advice about student loans it's easy to be misinformed. Watch out for these five student loan myths.
MYTH #1 – Before applying for any type of a student loan, the applicant must have an established credit history.
TRUTH – Student loans do not require credit checks. Students have not had the opportunity to create a credit history before graduating from high school. Lenders adjust interest rates and repayment terms for these instances.
MYTH #2 – Student loans are designated for the payment of tuition exclusively. All other expenses, such as textbooks, computers, supplies, fees and living expenses must be paid for through other means.
TRUTH – Students are responsible for using the student loan money appropriately to cover the costs associated with attending an institution of higher learning. Limitations placed on how the money can be spent will be detailed in the student loan documentation.
MYTH #3 – Student loans will cause future credit problems for the graduate.
TRUTH – Prompt repayment of the student loans can create a positive credit history that demonstrates responsible handling of credit. Lenders scrutinize future borrowers through the history of on-time payments. Repaid student loans remain on the credit history for many years as an indication of the graduate’s ability to manage credit.
MYTH –The student must have sufficient personal property to serve as collateral for the student loan.
TRUTH – Student loan terms are written without collateral since future employment is considered the means by which the loan will be repaid. In the federal student loan program, all students pay the same interest rate.
MYTH – Student loan default – The parents, or spouse, of the student will be given responsibility if the student defaults on the student loan payments.
TRUTH – The individual who signed the loan papers is responsible for repaying the student loan balance in its entirety. Certain hardship programs are available if catastrophic events prevent the graduate from repaying the loan. To make the loan payments more affordable, the graduate might want to consider a student loan consolidation program. Learn more about student loan consolidation and refinancing.
Looking for more information about student loans in Rockland or Bergen County? Contact a lender at Palisades CU to learn more about student loan programs in New City, Orangeburg, or Nanuet. View current student loan rates in Rockland and Bergen Counties.
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