6 Myths About Federal Student Loans

Here are 6 federal student loan myths.

Flickr user Rafael Gonzalez

Taking on student loans is how many college students can afford to go to college. They are often part of financial aid packages from colleges and universities. These student loans can seem daunting, especially with student debt being the highest it’s ever been. But one of the best ways to make something less scary is to do a little research so you can understand it. Here are some federal student loan myths that you might have heard.

Myth: I don’t have to worry about paying loans back while I’m in school.

This is one of the more common student loan myths. Many student loans don’t begin charging interest until 6-12 months after you graduate, or when you start paying them if you’re still in school (although unsubsidized loans charge interest from the moment you take them out). So while most people don’t have to pay back loans while they’re in school, that doesn’t mean you shouldn’t be planning ahead on how you’re going to do so. Try not to squander any money that you could be saving while you’re in school, and above all, don’t use your student loan money to promote yourself to a higher style of living.

Myth: I’ll never pay off my student loans.

While most of our generation isn’t likely to be buying houses anytime soon after graduating college, there are ways to make paying off your federal loans easier. Certain career areas (such as public service and teaching) often have forgiveness programs, provided you make steady payments for ten or fifteen years. You can change your payment plans to work with your income. The important thing to remember is to stay ahead of the interest rate; giving more than the minimum payment when you can afford it can go a long way toward speeding up your repayment process.

Sallie Mae logo.

3 Repayment Options

Variable rates from 6.37% - 16.70% APR with auto-debit

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Myth: My repayment plan is inflexible.

This is absolutely false. The lenders want to make their money back (with interest), and the only way to do that is to make sure you can afford it. Talk with your lender about which repayment plan might work best for you, or if you have to defer payment for a month. Keep in mind that interest is ever-accruing, even if you don’t make a payment.

Myth: My payments are going directly to paying off my loan.

Payments you make toward your student loans actually pay off the interest first, and whatever is leftover goes to your principal (the actual loan). So when you read about or hear people saying that you need to stay ahead of your interest, that’s what they mean. If your payments don’t cover the monthly interest on your loan, you will actually end up owing more money. The same principle applies to credit cards and car payments. This is why paying more than the minimum payment is beneficial whenever you can afford it.

Myth: Declaring bankruptcy will wipe out my student loan debt.

There are very few cases where this will actually apply, and most of those that do are because you are no longer able to work due to disability or accident. You would have to file an “undue hardship” petition, which has extremely high standards to follow through on.

Myth: Your student loans should be the first thing you pay off.

We’ve talked a lot about interest in this article, and for good reason: Interest is frequently what makes paying off loans so difficult. With that in mind, if you have another credit payment to make that has a higher interest rate than your student loans, you should focus on that first. Credit cards and personal loans are examples of debt that often have higher interest rates. You should also do your best to have an emergency fund or a retirement savings account.

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Lender Rates (APR) Eligibility
Citizens logo.
6.98%-15.04%* Variable
5.99%-14.00%* Fixed
Undergraduate and Graduate
Sallie Mae logo.
6.37% - 16.70% Variable
4.50% - 15.49% Fixed
Undergraduate and Graduate
Credibe company logo.
4.98% - 16.85% Variable
4.07% - 16.49% Fixed
Undergraduate and Graduate
Lendkey company logo.
6.07% - 11.31% Variable
4.39% - 10.39% Fixed
Undergraduate and Graduate
Ascent company logo.
6.24% - 15.85% Variable
4.29% - 15.76% Fixed
Undergraduate and Graduate
6.54% - 11.08% Variable
3.95% - 8.01% Fixed
Undergraduate and Graduate
Earnest company logo.
5.62% - 18.26% Variable
4.11% - 15.90% Fixed
Undergraduate and Graduate
4.98% - 12.79% Variable
8.42% - 13.01% Fixed
Undergraduate and Graduate
College Raptor is not a loan lender and does not assume responsibility for suggesting a loan to a user who may not be eligible for it. Rates, terms, conditions, eligibility, approval, and other considerations are the decisions of the lenders and may vary depending on which lender or marketplace the user selects. We urge users to carefully consider and review all loan options and terms before committing to taking out a loan.

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