International Baccalaureate (IB) Practice Exam

Which of the following is a common misconception about student loans?

1. All student loans need to be repaid

2. They can be beneficial for future investments

3. They are non-repayable grants

4. They help students acquire higher education

The correct answer is: They are non-repayable grants

A common misconception about student loans is that they are non-repayable grants. This belief stems from a misunderstanding of the nature of student loans, which are indeed loans that must be repaid, typically with interest. Unlike grants, which provide financial assistance without the obligation to return the funds, student loans contribute to a student’s debt burden. This misconception can lead individuals to underestimate the financial responsibility associated with borrowing money for education. In reality, student loans are a form of credit that helps students finance their education, and it's crucial for borrowers to understand that they are entering into a contractual agreement that necessitates repayment. The other options reflect the facts regarding student loans: all loans must be repaid, they can serve as a beneficial investment for future earnings, and they do enable students to pursue higher education. However, the key distinction is that student loans are not free money, making the belief in their non-repayable nature particularly misleading.