Student Loan Myth V: If I don’t finish school, I don’t have to pay my loan

For the second leg of our second installment on student loan myths, we will tackle the myth that may have resulted simply from a linguistic misinterpretation.

What you think happens. While you are talking to your student aid counselor at school they will mention you don’t have to start paying your loans until after you finish school.  You assume this means if you never finish (as in graduate) your loans will not take place.  After all you didn’t get a degree you can benefit from, so the loans did not give you what you desired.  Like anything else that doesn’t meet your needs, you can “take it back” and not have to pay for it.

What actually happens. This money was paid to your school and your school rendered a service to you.  Whether it was for two weeks, two years, or all but one class, you did participate in at least a portion of your education.  Similar to the previous myth, often times for the ease of it many just say “you begin payments after school.”  To reiterate once you withdraw, are less than half time, or graduate, your loans will enter their grace period or repayment status depending on the situation.

Where there may be a morsel of truth to this.  I get this call or email at least 3 or 4 times a month and don’t know where it comes from.  There is no truth to it.  The only silver lining is if you leave and then return to school as at least a half time student, you will return to an In-School Status if you are within your grace period or In-School Deferment if your grace period has been used or your loans are not eligible for Grace.