Are you a college student? Taken a loan to continue your study? Or contemplating taking one? Understand repaying the loan is more difficult than taking it. Even more so because there are misconceptions that make it difficult for students to get a loan and pay it off once their study is over.
I list down five such misconceptions here. Take a look:
It’s very tough
Getting a students loan is not very tough. It’s not very easy either. If you follow the right strategies, the odds of getting a loan would escalate. If you goof up, chances will reduce. The right strategy, in this context, means applying for a Federal student loan. Yes, you can apply for a private student loan, nothing is stopping you. But I suggest you apply for a Federal loan as it has some excellent perks.
When you are applying for a Federal student loan, all you need to do is fill out the Free Application for Federal Student Aid (FAFSA) form. To know whether you are eligible for the loan, click here. Rest assured that the financial aid departments of US colleges scrutinize every application with utmost attention. It’s their responsibility, not yours.
The application process is not so tough if you are applying for a Federal loan. But if you are applying for a private loan, there’d be a background check and several other procedures. Be prepared to face those procedures.
Loans disqualify other aids
This is one of the common student loan misconceptions. Taking a student loan doesn’t disqualify you from applying to and getting other forms of financial aids. Just look around you, you’ll see plenty of students who secured loans and were also awarded scholarships and university grants.
The truth is students who received multiple types of financial aids often find it difficult to manage all of them. A simple yet effective strategy is to use the money that you are supposed to pay back in the end. Student loan misconceptions are rampant and are reasons people can’t decide which money they should spend in the beginning and which in the end.
If other sources of money are strategically utilized, a student may not have to take any loan at all. The rule of thumb many people follow is taking a loan only when it’s totally necessary.
The waiting game
Among student loan misconceptions, one is students must wait to pay off the student loan. Nothing can be further from the truth. Waiting longer means the student will pay a large sum of money as the interest. It also means he’ll have incredible difficulty repaying the loan.
Most students wait until their graduation is over. That’s a mistake. Don’t wait. The sooner you pay off the student loan, the better. A great way to pay off the loan is to work part-time. If you are in college, you can work for at least 2 hours a day, making it to 40 hours a month. If the hourly wage is just the national average i.e. $7.5, you make $300 a month. In a year, you make 3600 and in three or four years, over $10K.
Think about it, if you have taken $100K student loan and wish to repay the money from the get-go, you can pay off 10% of that money by the time your graduation completes. Hence, it’s foolish to wait to repay the student loan. Get your act together now and take steps to pay off your student loan.
No flexible interest rate
This one is yet another student loan misconception. A lot of students believe they won’t get a loan at a good interest rate and won’t be able to repay the loan even after graduation and getting a job. None of these is true. Last year, the undergraduate loan was available at an interest rate of 4.5% and graduate loan at around 6%.
In the majority of cases, student loan comes with a low-interest rate. There are two reasons behind this:
First, the US government is not anti-education and they realize student loan is often more than essential. Second, student loan providers compete with each other and what can be the best way to attract consumers than reducing the interest rate?
Full repayment is necessary
This one should be stickied in the list of student loan misconceptions. Students don’t need to pay back the borrowed amount in full.
Student loan forgiveness is a thing. Collection agencies tend to cooperate with students. That, however, doesn’t mean all student loans are forgiven. Students who are from low-income families are normally shown grace. Also if a student chooses a profession like a nurse, police officer or firefighter, their loans may be forgiven.
For a loan forgiveness program, a student must apply and contact the lender.
Summing up
As we see in this article, the earliest the student loan misconceptions are cleared, the better. The tips shared here can help you in understand your chances if you have taken a student loan.