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7 common student loan myths debunked

Can you tell fact from fiction when it comes to your college debt? Here are the 7 common myths about student loans.

Student loans can be one of the most complicated types of debt out there, thanks to a wide range of repayment, forgiveness and deferment options. Knowing student loan fact from fiction can help you navigate repayments and save in both the short and long term.

The 7 myths about student loans:

  • Myth #1: I’m stuck with the same rates forever.
  • Myth #2: I should only refinance private loans.
  • Myth #3: Student loans should take priority over other types of debt.
  • Myth #4: Consolidation can give me better rates.
  • Myth #5: I can’t change my servicer.
  • Myth #6: Income-driven repayments are always cheaper.
  • Myth #7: Only federal loans are eligible for forgiveness.

Myth #1: I’m stuck with the same rates forever.

You aren’t. You can change your interest rate by refinancing your student loans with another lender. While you need excellent credit to get the best deal, you can also apply with a cosigner who has strong credit to help you qualify for a lower rate. Refinancing can also help you extend your term to lower your monthly repayments — or shorten it if you want to get out of debt faster.

If refinancing is off the table, you can often negotiate your rate down with private lenders. Call up your servicer and make a case for yourself — most are willing to tweak the terms to help you avoid defaulting.

Compare personal loans for refinancing

Before applying for a personal loan, contact the lender to see if they allow you to refinance the specific type of student loan that you have (federal, provincial and/or private).

Name Product Interest Rate Loan Amount Loan Term Requirements Credit Score Link
LoanConnect Personal Loan
Secured from 1.90%, Unsecured from 5.75%-46.96%
$500 - $50,000
3 - 120 months
Currents debts must total less than 60% of income
Min. credit score: 300
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An online broker who helps inform clients towards better finances. Get pre-approved by different lenders for unsecured or secured loans in 5 minutes with any credit score.
Spring Financial Personal Loan
17.99% - 46.96%
$500 - $15,000
9 - 48 months
Min. income of $1,800 /month, 3+ months employed
Min. credit score: 400
Go to site
More Info
An online lender offering unsecured personal loans and credit builder loans. Those filing for bankruptcy or a consumer proposal can also apply. If you're not eligible for an unsecured loan, you may be offered a loan to help rebuild your credit.
ConsumerCapital Personal Loan
19.99% - 34.99%
$1,500 - $12,500
24 - 60 months
Min. income of $1,900 /month, 6+ months employed
Min. credit score: 600
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More Info
An online lender that provides fast unsecured personal loans. Complete an application in less than 10 minutes and get a decision within 24 hours. For faster loan approval, complete the Flinks bank integration in the app.
SkyCap Financial Personal Loan
12.99% - 39.99%
$500 - $10,000
9 - 36 months
Min. income of $1,200 /month, stable employment
Min. credit score: 550
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More Info
An online lender offering unsecured personal loans to borrowers with a wide range of credit scores. Apply in less than 5 minutes and if approved, receive financing in as little as 24 hours.
FlexMoney Personal Loan
18.90% - 46.93%
$500 - $15,000
6 - 60 months
Min. income of $2,000 /month, 3+ months employed
Min. credit score: 500
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More Info
An online lender offering flexible unsecured loans. Apply in less than 10 minutes and if approved, receive financing in as little as 24 hours. Pay off your loan at any time.
Loans Canada Personal Loan
Secured from 2.00%, Unsecured from 8.00% to 46.96%
$300 - $50,000
3 - 60 months
No min. income or employment requirements
Min. credit score: 300
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More Info
An online broker with the largest lender network in Canada. Get matched for free with lenders offering both unsecured and secured loans through one quick application regardless of your financial situation.
goPeer Personal Loan
8.00% - 31.00%
$1,000 - $25,000
36 - 60 months
Recommended income of $40,000 /year
Min. credit score: 600
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More Info
Canada's first regulated consumer peer-to-peer lending platform offering unsecured loans. Connects creditworthy Canadians looking for a loan with Canadians looking to invest. goPeer strives to offer the most competitive interest rates. Apply in minutes and get a response within 24 hours.
OFFER
Mogo Personal Loan
9.90% - 46.96%
$200 - $35,000
6 - 60 months
Min. income of $13,000 /year
Min. credit score: 500


Mogo offers a 100-day money-back guarantee. If you're not happy with your loan, pay back the principal and get your 100 days of paid interest and fees back.
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More Info
An online lender who aims for a hassle-free process through same-day unsecured loan approval and funding. Get a loan fast and track your credit score for free.
Fairstone Personal Loan (Unsecured)
26.99% - 39.99%
$500 - $25,000
6 - 60 months
Able to make monthly repayments on your loan
Min. credit score: 560
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More Info
An online lender with a team dedicated to professional service. Get a quote for an unsecured loan without impacting your credit score. Receive funds within as little as 24 hours. No prepayment fees.
Fairstone Personal Loan (Secured)
19.99% - 23.99%
$5,000 - $50,000
60 - 120 months
Must be a homeowner
Min. credit score: 560
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More Info
Use your home equity to get a secured loan up to $50,000 with flexible repayment options and a long loan term. Get a quote without impacting your credit score.
Loan Away Personal Loan
19.90% - 45.90%
$1,000 - $5,000
6 - 36 months
No min. income or employment requirements
Min. credit score: 300
Go to site
More Info
A lender that approves unsecured loans in as little as 20 minutes. Get affordable monthly repayments with any credit score.
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Myth #2: I should only refinance private loans.

It’s true that refinancing government student loans means you lose all of the benefits that come with this government-issued debt. But if you’re making a high enough income to afford a standard repayment plan and have good credit, chances are you wouldn’t benefit from income-driven repayments, deferment or even student loan forgiveness. But you could benefit from lower rates with a private lender.

Consider what you stand to lose and if it would actually be a loss before you write off refinancing.

Myth #3: Student loans should take priority over other types of debt.

News of the student loan crisis might make you think you should get rid of this debt as fast as possible. Paying off any kind of debt as quickly as you can is generally a good way to save. But if you’re juggling student loans, credit card debt and car payments, you might want to have your student loans take a back seat.

That’s because student loans typically have lower rates and more flexibility if you’re in danger of defaulting than other types of debt. You can change your repayment plan on government loans at any time without having to refinance. And student loans generally come with more options to pause repayments if you hit tough times.

How to decide which student loans to pay off first

Myth #4: Consolidation can give me better rates.

Consolidating your government student loans is not likely to give you a lower interest rate. And if your credit score isn’t good or you income isn’t high enough, you probably won’t be able to lock in a better rate after consolidating your private student loans, especially if you can’t find someone who’s willing to cosign on the consolidation loan.

Myth #5: I can’t change my servicer.

You aren’t necessarily stuck with the company that handles your student loan repayments forever. With both federal and private loans, you can also change up your servicer by refinancing. Research your refinancing company’s servicer to ensure you’re making a change for the best by reading reviews and looking up complaints on the Better Business Bureau’s website.

Myth #6: Income-driven repayments are always cheaper.

Repayments based on your income are only less expensive if you have a low salary, high loan balance or both. But you might be surprised to find that fixed repayments are actually much less expensive than income-driven repayments — and much less of a hassle.

Myth #7: Only government loans are eligible for forgiveness.

While it’s true that the government offers student loan forgiveness in special cases, like for qualifying medical and nursing students, it’s much more rare to find similar programs for private student loans. Still, your best bet is to talk to your lender to ask about any loan forgiveness options they may offer. At the very least, you could negotiate to get a better interest rate or more favourable loan terms. Don’t be afraid to reach out to your lender because they will often try keep your business on different terms than lose your business all together if you were to default on the loan.

Bottom line

Student loans might be more flexible than you think. You have options to change your rates, switch servicers and even apply for forgiveness. You can learn more about how it all works by reading our guide to student loans.

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