Student loans can be confusing, especially with all the misinformation floating around. Recent changes to federal student loans, including new repayment plans and borrowing limits, have only made things more complicated. Some advice you come across might be outdated, while other advice is just completely inaccurate. College Ave shares common myths around student loans to help you separate fact from fiction and make more informed choices about your student debt.
Having bad credit doesn’t have to prevent you from getting a student loan. Most federal student loans don’t require a credit check at all. As long as you’re eligible for federal student aid, you can access student loans by submitting the FAFSA (Free Application for Federal Student Aid).
Private student loans do involve a credit check, which is why most undergraduate students (96%) and many graduate students (73%) apply with a cosigner. A cosigner is a parent or other trusted adult who shares responsibility for the loan.
Some private lenders offer no-cosigner student loans that rely less heavily on credit and more on alternative factors, like your school and major. These no-cosigner loans could be useful if you have weak credit and are applying on your own, but they may have higher interest rates.
Federal student loans and most private student loans let you postpone payments while you’re enrolled at least half-time in school and for six months or so after you graduate. This grace period is helpful for students who are focusing on their studies and not yet earning an income.
However, unsubsidized federal student loans and private student loans start accruing interest from the date of disbursement. This means your balance is quietly growing while you’re working toward your degree.
If you want to cut down on interest and reduce your borrowing costs, you could choose to make partial or full payments while you’re in school. Many private lenders offer the option of interest-only, $25-per-month, or full payments to student borrowers.
There’s no penalty for paying off federal or private student loans ahead of schedule. Even if you have a 10-year, 20-year, or longer term, you can always make extra payments to get out of debt faster.
Making extra payments can also save you money on interest. You may need to instruct your loan servicer to apply the payment toward your loan balance rather than saving it for a future bill.
Graduate students can still borrow federal student loans, but their options are more limited as of July 1, 2026. The One Big Beautiful Bill Act (OBBBA) eliminated the Grad PLUS program and adjusted borrowing limits for Direct unsubsidized loans for graduate students.
If you’re a new graduate borrower after July 1, your options are:
If you’re already in graduate school and borrowed before July 1, you’re considered a legacy borrower. That means you can keep borrowing Direct unsubsidized loans and Grad PLUS loans under the old rules for three more years or until your program ends, whichever comes first.
July 1 also brought major changes for student loan repayment plans. New borrowers after July 1 now only have two repayment plans to choose from.
If you borrowed before July 1 though, you have more options. You can use the new plans or keep accessing the old repayment plans, including the old standard plan, extended repayment, graduated repayment, and three income-driven repayment plans. Note that the SAVE plan is no longer available, and two other income-driven options, PAYE and Income-Contingent Repayment, will be eliminated by July 2028.
In previous years, parents could take out Parent PLUS loans up to their child’s cost of attendance, minus other financial aid received. As of July 1, Parent PLUS loans have a new annual limit of $20,000 per student and a lifetime limit of $65,000 per student.
Parent borrowers who took out loans before July 1, 2026, can stick to the old rules for three more years or until their child leaves school, whichever comes first.
While there have been major changes to the federal student loan system, the PSLF program has not been affected. The program still offers federal student loan forgiveness after 10 years of eligible public service and 120 on-time payments on a qualifying repayment plan.
There have been changes to income-driven repayment plans, though, so if you’re working toward PSLF, review your repayment plan to make sure your payments qualify.
Private lenders offer a range of fixed and variable rates on private student loans, with some starting lower than the rates on federal student loans. For instance, creditworthy borrowers may access rates as low as about 2% on a private student loan, whereas federal loan rates are currently fixed at 6.52% and higher.
Plus, many private student loans don’t charge origination fees, whereas federal loans come with fees of 1.057% or 4.228% of your loan amount, depending on the type of loan. At the same time, private student loans don’t typically offer as many protections as federal loans, so it’s usually wise to borrow federal loans before turning to private loans.
Private student loans also don’t qualify for federal loan forgiveness programs. But if your priority is getting the lowest interest rate possible, it’s worth shopping around and comparing your options.
Most private lenders let students postpone payments while they’re enrolled at least half-time in school and for several months afterward. Undergraduate students usually get a six-month grace period after they graduate, whereas certain graduate students may get nine months, 12 months, or longer.
A common exception is private loans for parents, which often require interest-only or full payments right away after the loan has disbursed.
Many students apply for private student loans with a cosigner to get approved and access better interest rates. A cosigner is equally responsible for the loan, and their credit can be impacted by how the loan is repaid (on-time payments can build credit, while late payments can drag it down).
But the cosigner doesn’t have to stay on the loan forever, as many private lenders offer cosigner release to qualifying borrowers. You can often apply for cosigner release after you’ve made a certain number of payments or a specific period of time has gone by.
You’ll also have to pass a credit check and meet other credit requirements. Besides cosigner release, another option for removing a cosigner is refinancing the loan in your own name.
While the terms consolidating and refinancing are sometimes used interchangeably, they refer to two distinct processes:
Consolidation keeps your loans in the federal system, whereas refinancing gets you a new private student loan. If you refinance any federal loans, you’ll lose access to federal benefits like income-driven repayment and forgiveness programs.
There’s no fee to consolidate or refinance student loans. You can apply for consolidation for free on the Federal Student Aid website or for refinancing directly with private lenders. If someone charges you a fee to consolidate or refinance, you may be paying for something you can do on your own for free or dealing with a student loan scam.
Refinancing student loans can be beneficial for some borrowers, but it’s not for everyone. If you’re relying on a federal repayment plan, forgiveness program, or other benefit, it wouldn’t be a good idea to refinance your federal student loans.
This is because refinancing federal loans means losing access to federal plans and programs, and the process is not reversible. Make sure you’re comfortable with this tradeoff before refinancing any federal student loans.
On the other hand, it could make sense if you don’t need federal benefits and can qualify for a lower interest rate. It may also be worth considering if you have high-rate private student loans and can get a better rate and terms.
Make sure you understand the pros and cons of refinancing student loans before you apply.
The federal student loan system recently underwent a major overhaul, and advice that was accurate prior to July 1, 2026, may no longer apply today, especially for new borrowers. Before you take out a loan, refinance existing loans, or pick a repayment plan, make sure you understand your options and how the latest changes might affect you. By learning about student loans and staying up-to-date on federal policies, you can avoid common misconceptions and make informed decisions about paying for your education.
This story was produced by College Ave and reviewed and distributed by Stacker.
