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3 big things Americans get wrong about student loans

Shawn M. Carter
3 big things Americans get wrong about student loans

More than 44 million Americans

have taken out student loans

to pay for school, but, according to a new survey, they don't know much about the nuances of those loans.

Millennial Personal Finance

polled 500 Americans with student loan debt who are currently in college or who graduated between 2014 and 2017. "We tested their basic knowledge on student loans by asking a few questions, and the results were uninspiring," the survey says.

Here are three categories where respondents were unsure of something or got the facts wrong:Interest ratesVariable interest rates in the United Sates are based on the market rate set by the Federal Reserve, the survey notes. But 33 percent of respondents believed rates change based on monthly payments and 14 percent thought they could to change their rate at any time.24 percent of borrowers thought rates were determined by credit score, 21 percent thought their grade point average influenced their rates and 12 percent believed that school choice or choice of major impacted their rates.And 56 percent didn't know the interest rate on their student loans.Federal student loan interest rates are set by Congress and private student loan rates are influenced by credit score, MPF notes.Repayment

While

some loans can be forgiven

, most of those are only ever partially forgiven and "it is generally hard to qualify," according to the survey.

About 34 percent of respondents believed the federal government would forgive their loans, and 15 percent didn't think they'd be required to pay back their loans at all.In addition, 59 percent didn't know the standard repayment term on federal loans and 51 percent didn't know the length of the post-graduation grace period on federal student loans, which is six months.RefinancingFederal and private student loans can be refinanced through a lender, but 25 percent of borrowers didn't know that, and 20 percent thought only federal student loans could be refinanced.And there's moreA few other details from the survey also stand out:81 percent of respondents didn't know that FAFSA stood for Free Application for Federal Student Aid58 percent thought a federal student loan required a cosigner

25 percent thought that

Senator Elizabeth Warren

, as opposed to

Betsy DeVos

, was the Secretary of Education

Most millennials know they could do more to learn about their loans, the survey makes clear. When asked to grade themselves on their loan knowledge, 57 percent gave themselves at a C or lower.

Student loans come with wide-ranging rules and distinctions, and not all repayment plans are identical. If you want to brush up on your knowledge, learn what happens if you

defer

or

default

. And learn how you can

pay back more quickly

or receive

assistance paying down your loans

.

Like this story?

Like CNBC Make It on Facebook

!

Don't miss:

The solution to the student loan crisis might be getting rid of loans, says CEO

More than 44 million Americans

have taken out student loans

to pay for school, but, according to a new survey, they don't know much about the nuances of those loans.

Millennial Personal Finance

polled 500 Americans with student loan debt who are currently in college or who graduated between 2014 and 2017. "We tested their basic knowledge on student loans by asking a few questions, and the results were uninspiring," the survey says.

Here are three categories where respondents were unsure of something or got the facts wrong:

Interest rates

Variable interest rates in the United Sates are based on the market rate set by the Federal Reserve, the survey notes. But 33 percent of respondents believed rates change based on monthly payments and 14 percent thought they could to change their rate at any time.

24 percent of borrowers thought rates were determined by credit score, 21 percent thought their grade point average influenced their rates and 12 percent believed that school choice or choice of major impacted their rates.

And 56 percent didn't know the interest rate on their student loans.

Federal student loan interest rates are set by Congress and private student loan rates are influenced by credit score, MPF notes.

Repayment

While

some loans can be forgiven

, most of those are only ever partially forgiven and "it is generally hard to qualify," according to the survey.

About 34 percent of respondents believed the federal government would forgive their loans, and 15 percent didn't think they'd be required to pay back their loans at all.

In addition, 59 percent didn't know the standard repayment term on federal loans and 51 percent didn't know the length of the post-graduation grace period on federal student loans, which is six months.

Refinancing

Federal and private student loans can be refinanced through a lender, but 25 percent of borrowers didn't know that, and 20 percent thought only federal student loans could be refinanced.

And there's more

A few other details from the survey also stand out:

81 percent of respondents didn't know that FAFSA stood for Free Application for Federal Student Aid

58 percent thought a federal student loan required a cosigner

25 percent thought that

Senator Elizabeth Warren

, as opposed to

Betsy DeVos

, was the Secretary of Education

Most millennials know they could do more to learn about their loans, the survey makes clear. When asked to grade themselves on their loan knowledge, 57 percent gave themselves at a C or lower.

Student loans come with wide-ranging rules and distinctions, and not all repayment plans are identical. If you want to brush up on your knowledge, learn what happens if you

defer

or

default

. And learn how you can

pay back more quickly

or receive

assistance paying down your loans

.

Like this story?

Like CNBC Make It on Facebook

!

Don't miss:

The solution to the student loan crisis might be getting rid of loans, says CEO



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