{"id":354820,"date":"2016-06-03T10:11:10","date_gmt":"2016-06-03T16:11:10","guid":{"rendered":"https:\/\/www.creditrepair.com\/blog\/?p=354820"},"modified":"2022-03-30T20:38:43","modified_gmt":"2022-03-31T02:38:43","slug":"student-loan-myths-debunked","status":"publish","type":"post","link":"https:\/\/www.creditrepair.com\/blog\/lending\/student-loan-myths-debunked\/","title":{"rendered":"Student Loan Myths Debunked"},"content":{"rendered":"<p><a href=\"https:\/\/www.creditrepair.com\/blog\/wp-content\/uploads\/2016\/06\/shutterstock_174215792-1.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-354824 size-large\" src=\"https:\/\/www.creditrepair.com\/blog\/wp-content\/uploads\/2016\/06\/shutterstock_174215792-1-434x400.jpg\" alt=\"shutterstock_174215792 (1)\" width=\"434\" height=\"400\" srcset=\"https:\/\/www.creditrepair.com\/blog\/wp-content\/uploads\/2016\/06\/shutterstock_174215792-1-434x400.jpg 434w, https:\/\/www.creditrepair.com\/blog\/wp-content\/uploads\/2016\/06\/shutterstock_174215792-1-450x414.jpg 450w, https:\/\/www.creditrepair.com\/blog\/wp-content\/uploads\/2016\/06\/shutterstock_174215792-1-600x553.jpg 600w, https:\/\/www.creditrepair.com\/blog\/wp-content\/uploads\/2016\/06\/shutterstock_174215792-1-900x829.jpg 900w, https:\/\/www.creditrepair.com\/blog\/wp-content\/uploads\/2016\/06\/shutterstock_174215792-1-300x276.jpg 300w, https:\/\/www.creditrepair.com\/blog\/wp-content\/uploads\/2016\/06\/shutterstock_174215792-1-768x707.jpg 768w, https:\/\/www.creditrepair.com\/blog\/wp-content\/uploads\/2016\/06\/shutterstock_174215792-1.jpg 1000w\" sizes=\"(max-width: 434px) 100vw, 434px\" \/><\/a><a href=\"https:\/\/www.creditrepair.com\/blog\/wp-content\/uploads\/2016\/06\/shutterstock_174215792.jpg\"><br \/>\n<\/a><br \/>\nApril Fool\u2019s has come and gone, but the financial \u201cpranks\u201d of education debt have the potential to stretch over years of April 1sts. The student loan crisis is a trillion-dollar problem in the United States, and a lack of basic knowledge is one of many contributing factors. Review the myths below before you embark on the path to higher education. What you learn will prevent you from suffering from years of foolish consequences.<\/p>\n<ul>\n<li><strong>Myth #1: Lenders cannot charge more than X% of my income per month during repayment<\/strong>. This myth is true for some loans, false for others. For example, suppose you apply for two loans during college:\n<ul>\n<li>Loan A: Federal Direct Subsidized: $10,000<\/li>\n<li>Loan B: Private loan: $25,000<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><!--more--><br \/>\nLoan A is backed by the federal government and may qualify for an income-sensitive repayment plan, limiting your monthly burden to 10 percent of your income. (Learn more about the different types of federal repayment plans <a href=\"https:\/\/studentaid.ed.gov\/sa\/repay-loans\/understand\/plans\/income-driven#monthly-payments\">here<\/a>.)<\/p>\n<p>Loan B is funded by a private company, which, like a credit card lender, has the ability to adjust interest rates and charge high monthly payments based on loan balance, regardless of your income. Many private lenders offer reduced payment options for qualified applicants, but like so many new grads learn, the law does not limit their ability to gouge borrowers at will.<\/p>\n<ul>\n<li><strong>Myth #2: Income-sensitive repayment will protect me from overwhelming debt. <\/strong>Many borrowers believe income-sensitive payments make student loans more affordable. While they may provide temporary budget relief, you\u2019ll pay more interest on your private and federal loans over time. According to the U.S. Department of Education:<\/li>\n<\/ul>\n<p><em>\u201cIncome-driven repayment plans usually lower your federal student loan payments. However, whenever you make lower payments or extend your repayment period, you will likely pay more in interest over time \u2014 sometimes significantly more. In addition, under current Internal Revenue Service (IRS) rules, you may be required to pay income tax on any amount that&#8217;s forgiven if you still have a remaining balance at the end of your repayment period.\u201d<\/em><\/p>\n<ul>\n<li><strong>Myth #3: All federal student loans have the same fixed interest rate<\/strong>. False. Federal loans vary by <a href=\"https:\/\/studentaid.ed.gov\/sa\/types\/loans\/interest-rates#rates\">type<\/a> and borrower (e.g., student vs. parent) and while all interest rates are fixed, they aren\u2019t identical. For example, the current rate for a Direct Subsidized undergraduate loan is 4.29%, while the rate for a Direct Plus loan for graduate students or parents is 6.84%, drastically increasing the interest due over time.<\/li>\n<li><strong>Myth #4: I can\u2019t afford school without student loans<\/strong>. True, higher education comes with a steep price-tag. According to a College Board survey, the average price of tuition for the 2014-2015 school year was $31,231 for private universities, $9,139 for in-state students attending public universities, and $22,958 for out-of-state students. These numbers don\u2019t include room and board, books, food, utilities, transportation and other living expenses. The average family isn\u2019t equipped to handle 100% of these costs, and many believe student loans are the only answer. Don\u2019t jump to loans right away. Consider alternative funding in the forms of:\n<ul>\n<li>Scholarships<\/li>\n<li>Grants<\/li>\n<li>Work-study<\/li>\n<li>Part-time employment<\/li>\n<li>Online resources, e.g., free books<\/li>\n<li>Reduced tuition for core classes through your local community colleges<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p>The resources don\u2019t end there. Download our free e-book, the <a href=\"http:\/\/assets.creditrepair.com\/students-guide-to-credit.pdf\"><em>Student\u2019s Guide to Credit<\/em><\/a> to learn more about loan-free financing.<\/p>\n<ul>\n<li><strong>Myth #5: Education debt won\u2019t affect my credit <em>that<\/em><\/strong> Millions of student borrowers are learning the hard truth about this myth. Graduating with mortgage-sized student loans is sure to affect your finances, especially with an entry-level salary. Let\u2019s break it down in terms of how credit scores are calculated. The <a href=\"https:\/\/www.creditrepair.com\/blog\/credit-score\/five-factors-how-your-credit-score-is-calculated\/\">Five Factors<\/a> include:\n<ul>\n<li><strong>Payment history (35 percent). <\/strong>The ability to pay your bills has a significant effect on your credit score. Overwhelming loans can hinder your post-grad budget before your career is established.<\/li>\n<li><strong>Debt utilization (30 percent). <\/strong>Student loans are considered installment debt, which means they don\u2019t impact credit utilization (amount owed vs. total credit limit) in the same way as consumer credit cards. On the other hand, student loans will affect your debt-to-income ratio, a key factor that qualifies you for home loans, auto-financing etc. Learn more about the differences <a href=\"https:\/\/www.creditrepair.com\/blog\/credit\/how-debt-to-income-ratio-affects-your-credit\/\">here<\/a>.<\/li>\n<li><strong>Credit length (15 percent), new accounts (10 percent), and diversification (10 percent). <\/strong>Limiting your ability to secure new loans is a major risk of student lending. If your loans exceed your income, lenders aren\u2019t likely to offer funding for housing, cars, personal expenses and more. This consequence can damage your credit score by up to 35 percent.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>The bottom line: Don\u2019t begin your education with a lack of financial knowledge. Utilize our e-book and other available resources to pursue a degree deliberately and safely.<\/p>\n<p><strong>&nbsp;<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>April Fool\u2019s has come and gone, but the financial \u201cpranks\u201d of education debt have the potential to stretch over years of April 1sts. The student loan crisis is a trillion-dollar problem in the United States, and a lack of basic knowledge is one of many contributing factors. Review the myths below before you embark on [&hellip;]<\/p>\n","protected":false},"author":13,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[59],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v17.5 (Yoast SEO v18.5.1) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Student Loan Myths Debunked - CreditRepair.com<\/title>\n<meta name=\"description\" content=\"Review the myths below before you embark on the path to higher education. What you learn will prevent you from suffering from years of foolish consequences.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.creditrepair.com\/blog\/lending\/student-loan-myths-debunked\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Student Loan Myths Debunked\" \/>\n<meta property=\"og:description\" content=\"Review the myths below before you embark on the path to higher education. What you learn will prevent you from suffering from years of foolish consequences.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.creditrepair.com\/blog\/lending\/student-loan-myths-debunked\/\" \/>\n<meta property=\"og:site_name\" content=\"CreditRepair.com\" \/>\n<meta property=\"article:published_time\" content=\"2016-06-03T16:11:10+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-03-31T02:38:43+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.creditrepair.com\/blog\/wp-content\/uploads\/2016\/06\/shutterstock_174215792-1-434x400.jpg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Sarah Szczypinski\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.creditrepair.com\/blog\/#website\",\"url\":\"https:\/\/www.creditrepair.com\/blog\/\",\"name\":\"CreditRepair.com\",\"description\":\"We are the credit repair experts\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.creditrepair.com\/blog\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"ImageObject\",\"@id\":\"https:\/\/www.creditrepair.com\/blog\/lending\/student-loan-myths-debunked\/#primaryimage\",\"inLanguage\":\"en-US\",\"url\":\"https:\/\/www.creditrepair.com\/blog\/wp-content\/uploads\/2016\/06\/shutterstock_174215792-1.jpg\",\"contentUrl\":\"https:\/\/www.creditrepair.com\/blog\/wp-content\/uploads\/2016\/06\/shutterstock_174215792-1.jpg\",\"width\":1000,\"height\":921},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.creditrepair.com\/blog\/lending\/student-loan-myths-debunked\/#webpage\",\"url\":\"https:\/\/www.creditrepair.com\/blog\/lending\/student-loan-myths-debunked\/\",\"name\":\"Student Loan Myths Debunked - CreditRepair.com\",\"isPartOf\":{\"@id\":\"https:\/\/www.creditrepair.com\/blog\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.creditrepair.com\/blog\/lending\/student-loan-myths-debunked\/#primaryimage\"},\"datePublished\":\"2016-06-03T16:11:10+00:00\",\"dateModified\":\"2022-03-31T02:38:43+00:00\",\"author\":{\"@id\":\"https:\/\/www.creditrepair.com\/blog\/#\/schema\/person\/d3e71b72daf197806b1741f59a515dc7\"},\"description\":\"Review the myths below before you embark on the path to higher education. 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