Student Borrowers Believe in Misconceptions about Loans
Students borrowers believe in various misconceptions related to student loan debts that can make these loans more expensive, a new report by Student Loan Hero has found.
Out of 638 full-time college students surveyed for the report, about 66 percent believe that in the event of economic hardship, they can defer student loans until they are able to resume repayment. However, it is not the case. For deferment, a student has to meet certain criteria and it will be available for up to three years.
About 52 percent believe that monthly student loan payments are determined by income by default. However, the default repayment plan for all federal student loans is a 10-year “standard” plan, which doesn’t factor in income.
“An incorrect belief can be more dangerous than a lack of knowledge. If a student thinks that electing forbearance would stop interest from accruing, for example, they might be more likely to apply for the repayment postponement in situations where it’s not completely necessary,” the report read.
Nearly half of those surveyed also believed that they don’t need to worry about accruing interest on unsubsidized loans while they are still in college. In reality, the interest doesn’t accrue on direct subsidized loans while enrolled, but it does for direct unsubsidized loans.
When it comes to forgiving student loans, 65 percent of the students were either “very” or “somewhat” sure that their loans will be forgiven one day, either through legislation or through the Public Service Loan Forgiveness program.
In June, Bernie Sanders had introduced a bill that would completely eliminate student debt by imposing a tax on Wall Street and make two and four-year public and tribal colleges and universities tuition-free and debt-free.