In the hierarchy of financial aid, you should always seek gift-aid first before taking out a student loan, but the cost of attendance can often exceed the amount of gift-aid – if that is the case, student loans are a viable option. When looking at your loan options, make sure to research the interest rates, repayment logistics, and always read the fine print (usually located in the promissory note). To help you navigate through the realm of student loans, we listed a few myths below:
“All student loans are the same”
False - Not all loans are created equal! Generally, federal loans for students offer the lowest interest rates and flexible repayment options, and the federal direct student loan should always be your first choice. If you need additional funds, the State of Alaska offers student and family loan options. Banks may also offer private loans, but be on the lookout for variable rates, which can change (and go up significantly) over time. Fixed rates stay the same for the life of the loan. You also need to be sure to compare rates. Even less than a percentage point difference can add up to thousands of dollars over four years of school.
“I’ll be paying off my loans forever”
False – Most students loans are on a 10-year repayment schedule. One way to shorten your repayment schedule is by making payments while in school – read One Big Reason to Make Loan Payments in School for more information.
“I can get rid of my student loans without having to pay them off”
False – You must pay back your student loans. Generally, not even declaring bankruptcy can get rid of student loans.
“Student loans should be avoided at all cost”
False - When a loan lets you attend full-time, focus on your studies, and graduate faster, it pays off. A recent study* showed that students who borrow attempted more courses, earned more credit, and had higher GPAs. Of course – never borrow more than you need to.
If you would like more information about student loans or need assistance with navigating the process, feel free to contact the ACPE Success Center at 907-269-7980 or by email at ACPESuccesscenter@alaska.gov.
* https://www.educationnext.org/benefits-of-borrowingevidence-student-loan-debt-community-college-attainment/ Retrieved 3/29/2019