Myths of Student Debt

Many students go off to college every year without a real understanding of student loans and, as a result, find themselves deep in debt once their education career is over. In some cases, loans are necessary for students to get an education, but if other funding is available, avoid taking out loans as much as possible. Students and their parents should inform themselves about the details of student loans and the myths that can potentially set individuals back financially for years or even decades.

Student Loans Are Good Debt

While student debt is relatively good debt compared to other debts like credit cards, a loan is still a loan, and will be called upon until satisfied. Students should also be aware that federal student loan debt is not forgiven through bankruptcy. Attending school is an important decision that should be carefully thought out; if you have an option to save tens of thousands of dollars at one school over another due to scholarships or other situations, consider choosing the cheaper school. The less debt you have in student loans, the faster you can become financially secure as a student and working professional.

All College Students Take Out Loans

Another common myth regarding student debt is that all students who attend a university or college take out loans. While not all students come from a wealthy family, students can still attend college without going into student loan debt. This can be possible through tuition assistance from the school, work-study programs or working a part-time job to pay tuition. Also, you can work and save during high school to help pay for college. A number of grants and scholarships are available, and those with military backgrounds can take advantage of the GI Bill to help cover education costs.

Waiting to Pay

A common and potentially dangerous myth regarding student debt is that it is better to wait until after college to begin making payments. It is true that students are not required to make payments toward their loans while in school. However, this does not mean students should wait until graduation to start making payments. Unsubsidized loans accrue interest while in school, so the loan amount is higher upon graduation if you do not make any payments while in school. Student loans can easily exceed $100,000 by the time graduation comes around, which is not a good way to start life in the real world. Students should start making payments toward their loans while still in school if possible; even small or partial payments help over time.

Necessary for Good Financial Future

Students do not need to acquire student loans to build credit for their financial future. Credit can be established with a credit card or car loan, as long as you make payments on time each month and use the credit card responsibly. To build a good financial future, students should focus on saving and building capital. It is always better to have a cash surplus than available credit you cannot afford to pay off.