Free college loan misconceptions

Most people have heard the expression "there is no such thing as a free lunch." Many college students have also heard the phrase "free college loan" advertised on campus or it's come in the form of junk mail in their inbox. However, there is a misconception here. You see, some people think a free college loan is the same as a grant or scholarship, but this is not the case. A free college loan is a loan in which you don't have to pay an application fee or the standard 3% origination fee that most lenders charge.

Be wary of free college loan advertisements

When lenders use the phrase "free college loan" people assume they won't have to pay the money back; however, they are overlooking the key word in the phrase—loan. This means that the money will have to be paid back. If you find a lender who is advertising a free college loan be wary of it. It may be too good to be true.

Lenders make big money off free loans

Keep in mind that lenders are mainly concerned with one thing: making money. They will offer you a free college loan that costs you nothing up front and they won't add on an origination fee, but they'll be making that money back somewhere over the course of you repaying the loan. Lenders generally like to hide this in the back end of the loan where you won't notice it, meaning they charge you a higher interest rate or they repayment plan is drawn out so that they make more money off the interest, and to ensure they make the money back they generally have penalties for repaying the loan faster than the repayment terms state.

Federal aid better than free college loans

A free college loan is provided through a private lender, which means that you're not getting a very good interest rate. The best place to start when seeking financial aid is the government. Go online and fill out a FAFSA and see what they will qualify you for first. If you need more money then seek out a private lender, but it may be a wise decision to stay away from those offering a free college loan.