Shuddering at the thought of taking out a student loan? Don't! If you've decided this may be the best course of action when financing your tuition, beware certain myths floating out there which might scare you away from making a great investment in your future.
Of course, almost every product comes with a warning, and a student loan is no different: do take the time to research your loan exhaustively, and do keep in mind that although most lenders genuinely want to see you get through school, so you can succeed and pay them back, some are not as scrupulous and may not be legal.
Okay — now back to dispelling myths about student loans!
MYTH: I need to have an existing account or credit at a banking institution to qualify for a federal or private loan.
TRUTH: You do not. For instance, Federal Stafford Loans do not require credit checks (though read paperwork thoroughly to understand obstacles if you have previously defaulted on a loan). Private loans are available for students who do not have a perfect credit history, or any history at all, though each lender will differ in interest rates and repayment terms accordingly.
MYTH: I need to have collateral for a student loan.
TRUTH: You do not necessarily need collateral, though again, this may or may not affect payment terms and interest rates.
MYTH: Student loans will only cover tuition — I'm on my own for living expenses, textbooks, computers and supplies.
TRUTH: Federal loans typically do not cover all the ancillary costs of obtaining a higher education, but they do cover some and private loans most definitely can fill in any gaps.
MYTH: If I default on my loan, my parents or spouse will be responsible for picking up the slack.
TRUTH: Nice try. If you're 18 years or older and it's not your parent's loan, which is a topic for another discussion, you're entirely on the hook! This doesn't mean there isn't counseling out there and — as discussed below — debt consolidation options, but you are still responsible for your loan.
MYTH: I'll forever be on pins and needles after graduation, wondering how much interest rates are going to make my payments fluctuate!
TRUTH: There are many, many ways to lock in an interest rate by consolidating your loans. Even if you only have one loan, you can consolidate it with another lender. Be aware, however, that you might jeopardize your grace period for commencing payments after graduation if you do this. Be sure you know the “small print” of your loan inside and out.
MYTH: Obtaining a student loan will flag your future credit with lenders!
TRUTH: On the contrary! Successful repayment of a student loan means you have made a huge investment in yourself through education, and that you are responsible and mature!