Mark Kantrowitz at the Washington Post described about the student loan myths and facts that students should know about. Many students and their families do not know about available scholarships and financial aid information. Opting for student loan generally is the easy choice for the students however they do not understand or have misconceptions about student loans.
In the event of protests by students at the Wall Street, Mark described five myths about the student loans which should they know about.
1. Economy can be stimulating by forgiving student loans
People may think that by waving off the debt for students will stimulate the economy. But Mark said that about 5.6% is collected annually from student debt of about 1 trillion, which would be about 65 billion dollars. This is small compared to other stimulant packages and may not be effective.
2. All education debt is good debt.
People may think that by investing in themselves with debt will help them in getting better job. But may students with high student loans are not able to complete major events of their life on time, such as marriage. He suggested ideally student loan should be repaid with in 10 years.
3. Bankruptcy can save you from student loans.
There were only 29 successful full or partial discharge of student loans out of 72000 cases filed for bankruptcy cases in 2008. It is not easy to get rid of the student loans by declaring bankruptcy.
4. Government’s deficit will get worse with more student loan defaults
Government actually remains profitable by student loans. Govt can collect higher taxes from default student loans.
5. The private sector student loans can be better then Federal loans.
Private loans required excellent credit history or with a creditworthy co-signer, but Govt loan is actually available to all students without regard to the borrower’s credit history.
International Student Adviser