After four years of student loan blogging, I have encountered, and debunked, a number of myths associated with student loans. Indeed, there is a lot of misleading information about student loans on the internet, and some sources might suggest competing strategies for dealing with student debt. In any event, the biggest student loan myths I have encountered fit into a few distinct categories, and it is important that individuals are familiar with misinformation that might exist about student debt.
Educational Costs Have Risen at or Near the Inflation Rate
One of the biggest student loan myths is that educational costs have simply risen with the inflation rate, and accordingly, it is just as easy now as it was decades ago to pay for school. I remember one of my bosses at work conveyed this myth to me, and we even went to his desktop to do some rough calculations of how much this boss paid for educational costs in the 70s, and what the expenses would be in today’s dollars. Very quickly, my boss realized what I had explained to him earlier: that educational expenses have risen at a far greater rate than inflation for decades.
It is important to debunk this myth because many people in prior generations do not understand how students have it more difficult when it comes to educational expenses than they did. Indeed, people could actually work part-time during school to pay most or all of their educational expenses, which is almost impossible to do in the present environment. It is especially important to debunk this myth to individuals in older generations because they might honestly not know how educational costs have risen at a greater rate than inflation for decades.
Borrowers Are Totally To Blame for Student Loan Woes
Another one of the biggest student loan myths is that student debt borrowers are completely to blame for any financial problems they might suffer because of student debt. Many people believe that students can rely on published statistics about employment outcomes, salaries for graduates, and other information to make informed decisions about whether it is worth it to borrower debt to attend a given program. Since students purportedly have their eyes open when they decided to borrower student loans, they should not blame others for their issues.
However, many schools and other institutions published misleading employment statics and other information about their programs. Indeed, this was a huge issue with law schools over the past decade and many schools used small sample sizes and other tactics to publish misleading information about the employment prospects of graduates. If students were not provided with accurate information, they cannot be expected to make the best decisions about their borrowing, and people are not totally to blame for many student loan issues they face.
More Debt Does Not Equal More Income Potential
A different one of the biggest student loan myths is that more debt will mean that the borrower will earn a higher income, and accordingly, be able to repay their debt quickly. It is true that borrowing debt to earn educational credentials can increase your income potential in some instances. Some high-paying jobs require advanced degrees and training that might need people to rack up debt.
However, not all educational programs are created equal and people with the same credential may not be able to earn equivalent sums of money. In the legal industry, for instance, it generally costs a similar amount of money to attend the best law schools and the less well-regarded law schools. However, graduates from the best law schools will typically have the most opportunities to earn high-income positions while graduates of lower-ranked law schools may have less opportunities. As a result, individuals need to carefully conduct their research before deciding to borrow debt and determine if there is a good chance that borrowing student loans in their particular situation will likely mean that they will earn substantial sums of money after graduation so that they can repay loans.
Early Repayment Doesn’t Always Make Sense
A longstanding, and perhaps one of the biggest student loan myths, is that it always make sense to repay student loans as quickly as financially possible. As many people know from firsthand experience, student loans often have insanely high interest rates, and the longer you take to repay student loans, the more interest will accrue on the debt. However, individuals working in public-interest fields may not have an incentive to pay off student loans quickly since they may be able to take care of their debt by devoting a set percentage of their income to loans for a certain number of years and have the remaining debt forgiven. In addition, if individuals are able to get a low interest rate on their loans, either from refinancing or otherwise, they may be able to invest their money and earn a greater rate of return than the interest rate of their loans. Early repayment of debt is an individualized assessment and it often does not make sense to repay student loans as quickly as possible.
Just like many other fields, there are many student loan myths, likely because some people have misperceptions about student debt. In any event, people should know about the biggest student loan myths so that they can make decisions based on accurate information and not be misguided when it comes to student debt.