Understanding student loans can be daunting, especially with recent changes to federal borrowing limits and repayment plans. College Ave has compiled a list of 13 frequent myths and set the record straight, helping families make informed decisions about financing higher education.

Myth 1: Bad credit blocks federal loans

Federal student loans generally do not require a credit check. As long as a borrower qualifies for federal aid, they can receive loans by completing the FAFSA (Free Application for Federal Student Aid).

Myth 2: Private loans never need a cosigner

Private lenders do run credit checks, which is why a large majority of undergraduate borrowers (96%) and many graduate borrowers (73%) apply with a cosigner—often a parent or trusted adult who shares responsibility for the loan.

Myth 3: No‑cosigner private loans are risk‑free

Some lenders offer loans that rely less heavily on credit and more on factors such as school and major. While these can help borrowers with weak credit, they typically carry higher interest rates.

Myth 4: Payments must start immediately

Both federal and most private loans allow borrowers to postpone payments while enrolled at least half‑time and for a grace period after graduation—usually six months for undergraduates and up to twelve months for certain graduate borrowers.

Myth 5: Unsubsidized loans don’t accrue interest

Unsubsidized federal loans and private loans begin accruing interest from the date of disbursement, meaning balances grow until payments begin.

Myth 6: You can’t pay interest while in school

Borrowers can reduce overall costs by making interest‑only, partial, or full payments during school. Many private lenders offer flexible payment options, such as $25‑per‑month plans.

Myth 7: Early repayment incurs penalties

There are no penalties for paying off federal or private loans ahead of schedule. Extra payments can shorten the loan term and save on interest, though borrowers should ensure payments are applied to principal.

Myth 8: Graduate borrowers have the same options as undergraduates

Effective July 1, 2026, the One Big Beautiful Bill Act (OBBBA) eliminated the Grad PLUS program and adjusted borrowing limits for Direct unsubsidized loans. New graduate borrowers now have fewer loan products, while legacy borrowers can continue under old rules for three years or until program completion.

Myth 9: All repayment plans are still available

Borrowers who took out loans after July 1, 2026, can choose from only two repayment plans. Those who borrowed earlier retain access to older plans, including the standard, extended, graduated, and three income‑driven options. The SAVE plan is no longer offered, and PAYE and Income‑Contingent Repayment will be phased out by July 2028.

Myth 10: Parent PLUS loans have unlimited limits

Starting July 1, 2026, Parent PLUS loans are capped at $20,000 per student annually and $65,000 lifetime. Parents who borrowed before that date can continue under the previous limits for three more years.

Myth 11: Public Service Loan Forgiveness (PSLF) was changed

The PSLF program remains intact, offering forgiveness after ten years of qualifying public‑service employment and 120 on‑time payments on an eligible repayment plan. Borrowers should verify their plan qualifies under the updated income‑driven options.

Myth 12: Private loans always cost more

Private loan rates can start as low as about 2% for creditworthy borrowers, while current federal loan rates are fixed at 6.52% or higher. However, private loans often lack the borrower protections and forgiveness options available with federal loans.

Myth 13: Consolidation and refinancing are the same

Consolidation keeps loans within the federal system, preserving benefits like income‑driven repayment and forgiveness. Refinancing replaces federal loans with a new private loan, which eliminates those federal benefits. Both processes are free of fees when done through official channels; any fee charged may indicate a scam.

Students and families should weigh the trade‑offs between interest rates, borrower protections, and repayment flexibility before choosing between federal and private financing. Understanding the true facts behind these myths can help avoid costly mistakes and keep higher education within reach.

Original reporting: KTVZ (Central Oregon) — read the source article.