Whether you’re taking out student loans for the first time or have taken them out before, odds are that you’ve heard a lot of fact and fiction about the process. Here are five common misconceptions around graduate student loans.
Myth No. 1: Interest starts accruing immediately once you’ve booked a loan.
Interest on your student loan won’t start accruing until after your school disburses the funds. Each school determines its own loan disbursement dates, which are often before the first semester begins. Therefore, it is a good idea to ask your financial aid office for the disbursement date, as this is when interest will actually start to accrue. What this means is that you won’t save interest expenses if you wait until the last minute to book your loan. In fact, if you knock out a loan application today, you could save yourself some stress and start enjoying the rest of summer.
Myth No. 2: Federal loans have the lowest rates, so you should always “max out” your federal loans.
The answer may be different depending on whether you’re borrowing for college or graduate school. Direct federal loans for undergraduates are subsidized with lower rates so it’s good to max out that option before turning to private loans for college.
However, when it comes to graduate school, especially if you’re attending a specialized program such as dental school, you can often find a cheaper alternative with a private loan. The Federal Direct Unsubsidized loan for graduate students carries a 6.08% interest rate with a 1.06% fee (the maximum amount you can borrow is $20,500). The Federal Graduate PLUS loan carries a 7.08% interest rate with a 4.24% fee. For each of these options, the government offers the same rate to all graduate students regardless of their course of study.
CommonBond offers specialized loans for students attending dental school. These loans are designed to save students money vs. federal options with rates ranging from 5.30–6.94% APR for a variable rate loans1 and 5.33–6.98% APR for fixed rate loans, with a 2% fee.2 Over the life of your loan, a CommonBond loan could help you save thousands. Check your rate see how much you could save.
Myth No. 3: The government will forgive your loan.
If you are planning to work in public service or a non-profit, you may have heard of Public Service Loan Forgiveness. This is a federal program for individuals working full-time for a qualifying employer that forgives the remaining balance on your Federal Direct Loans after you have made 120 qualifying monthly payments under a qualifying income-based repayment plan. If you’re thinking about this route, don’t just assume your application will be approved without doing due diligence. Check (and keep checking) your eligibility, as only a slim percentage of individuals who apply are approved. In fact, as of March 31, 2019, 99% of all Public Service Loan Forgiveness applications submitted were rejected.
Myth No. 4: Only federal loans offer protections
CommonBond loans come with protections such as forbearance, which means you can “press pause” on payments for up to 12 months over the life of your loan if you unexpectedly encounter economic hardship or issues. Additionally, in the event of death or total and permanent disability, your CommonBond loan would be canceled.
Myth No. 5: Once you’ve booked a loan, there’s no way to “un-book” it.
If you already booked a Federal PLUS Loan, but now realize you can find a cheaper loan from a private lender like CommonBond, you can cancel all or a portion of your loan disbursement within 120 days of the date your school disbursed the funds. If you cancel your loan, you will have to return the money, but you will not be charged any interest or fees on the canceled loan.
Learn more about CommonBond’s new loan offering.
(1) Variable rates may increase after consummation.
(2) Subject to state law restriction.
This blog post was sponsored by CommonBond.