6 myths about saving for college

Know how to separate fact from fiction when determining how to pay for college.
1. Your loans are automatically forgiven if you work in public service for 10 years.
To have your loans forgiven through the federal Public Service Loan Forgiveness program, you’ll need to enroll and update your income, family size and employment every year. There are numerous technical requirements to qualify for the program, so be sure to research it before making any decisions on your loans.

2. If I can’t save enough to pay all the costs, it’s not worth it to keep saving for college.
If you decide college is worth it, then saving for college will be worth it, too. While your goal may be to pay for college without loans, saving as much as you can—even if it’s not the full amount—allows you to take a smaller loan to cover the rest. It also lets you take advantage of potential compounding to help your savings grow. Finally, the smaller the loan you have to take, the less interest you’ll owe when paying it off—an important consideration no matter how much you earn after attending college.

3. Federal loans are always better than private loans.
Federal loans typically have lower interest rates, and all borrowers are eligible for the same rate for the same loan. However, if you have excellent credit, private lenders may offer you an interest rate that’s lower.
4. You should find a way to pay your student loans off as fast as possible.
While it’s always nice to not have student debt hanging over your head, student loans typically have low interest rates, and the interest you pay on them may be tax-deductible. Instead of paying off your student loans as quickly as you can, it may be smarter to focus on paying off high-interest credit cards or even building up your emergency savings.

5. You should always try to consolidate your student loans.
Even though loan consolidation may have benefits, such as a single bill instead of multiple payments to different lenders each month, make sure to note the terms of the consolidated loan. For example, is the new interest rate the same as or lower than your old interest rates? Does the consolidated loan provide a lower monthly payment only by extending the length of the loan so that you’ll pay more over time in interest? These are important considerations.

6. I should save for a child’s college education before I save for retirement because their college years will happen first.
It’s important to consider the financial implications of saving for college. While many parents want to provide a college education for their child, there are many low-interest loan programs available to help. Similar programs do not exist to help you fund your retirement, which is why it’s important to make sure you’re saving for retirement first, and then contribute to a college savings fund after.