Myth 1: Refinancing Federal Loans Always Saves Money
Reality: Refinancing federal to private only saves money if: the rate reduction exceeds the value of lost federal benefits. For PSLF-eligible borrowers, refinancing can cost $100,000+ in forgiven balance. For borrowers with high DTI who need IDR, refinancing eliminates the safety net.
Myth 2: Paying Extra on Student Loans Is Always Wise
Reality: For PSLF-eligible borrowers, every extra dollar paid is a dollar NOT going toward forgiveness any faster. PSLF requires 120 payments of any qualifying amount — not a specific dollar amount. A PSLF borrower paying $1,000/month vs. the $100/month SAVE minimum is paying $900/month they’ll never recover after forgiveness.
A PSLF borrower with $80,000 in debt who pays $800/month (above required $120/month SAVE) for 8 years, then gets forgiveness: paid $76,800 total. If they’d paid $120/month for 10 years: paid $14,400 total — saving $62,400. Extra payments on loans heading for PSLF forgiveness are literally thrown away.
Myth 3: Student Loans Cannot Be Discharged in Bankruptcy
Reality: Student loans CAN be discharged in bankruptcy — it’s just harder than other debt. The 'undue hardship' standard has historically been interpreted narrowly, but the DOJ/DOE issued new guidance in 2022 creating an Attestation process that has made discharge more accessible for genuinely insolvent borrowers. It’s not easy, but it’s not impossible.
Myth 4: Graduate School Loans Are Always Worth It
Reality: Graduate school ROI varies enormously by degree, institution, and career path. MBA from Harvard: historically excellent ROI. Master’s in Journalism at a regional school: DTI ratio often exceeds 3× expected salary. Every graduate degree decision should include a debt-to-expected-salary calculation before enrollment.
Myth 5: Federal Loan Forgiveness Is Guaranteed
Reality: IDR forgiveness at 20–25 years is a statutory program, but the forgiven amount may be taxable (the 'tax bomb') and program rules can change legislatively. PSLF has more legal protection as a contractual promise but has faced administrative challenges. Plan for worst-case scenarios: treat forgiveness as possible but not guaranteed.
Build Your Strategy on Real Numbers
Compare PSLF, IDR, and standard repayment — see which plan actually produces the best outcome for your situation.