Many post-secondary school students will experience a sudden boost in their finances at the start of this school year as the government deposits their loan money. 

But the seeming windfall is hardly the same as Ed McMahon showing up at a dorm room with a coveted million-dollar cheque.

The federal and provincial governments have doled out billions of dollars in student loans, and estimates suggest the average Canadian graduates with between $20,000 and $30,000 of debt. So, experts say, it's crucial that students understand the ins and outs of the student loan system.

Myth 1: It'll be enough to pay for school

Many prospective students apply for government loans with an idealistic notion that they will receive enough money to cover all their expenses, says Laurie Campbell, CEO of Credit Canada Debt Solutions.

People tend to believe that their loan will pay for tuition, textbooks and living expenses, she says.

It seems like you have a bucketload of money - Laurie Campbell, Credit Canada Debt Solutions CEO

But, the government calculates how much money a student needs to supplement what it determines the person and their parents can afford based on a number of factors, including parental and student income, and family size.

In an Ontario family of four with an annual gross income of $94,000 and one child pursuing post-secondary studies, for example, the parents should contribute about $1,050 each year, according to an online parental contribution calculator.

Just based on parental income and family makeup, that student is likely to be assessed for roughly $1,050 less in loans than their total schooling costs.

"That may very well not be all you need for school," says Campbell. "You may need to top that amount up" with some combination of part-time work, prior savings, private loans, and scholarships or grants.

Other students may actually receive more than they need.

Krystal Yee, who tracked her $20,000 debt repayment journey on her personal finance blog, was"really shocked" when the government approved her for "way more" than necessary.

Myth 2: It means you're rich

Yee reacted like many students would.

"This is free money. I can spend it any way I want," she remembers thinking.

That's the temptation for many young adults who find themselves with a large sum of money in their banking accounts — be it from the bank of mom and dad, student loans or other means — come late summer.

"It seems like you have a bucketload of money," Campbell says.

A simple budget should demystify that misconception.

For the lucky few, like Yee, who find themselves with extra cash, Campbell suggests either returning the unnecessary funds to avoid temptation or investing wisely to "come out ahead of the game at the end of school."

Interest earned on those investments can help repay outstanding student loans after graduation.

Myth 3: You don't have to pay them back — ever

It may sound crazy, says Kyle Prevost, co-author of More Money for Beer and Textbooks, but not all youth realize a loan is something they have to pay back. Not to mention, most government student loans accumulate interest after graduation.

"I know a lot of students that were not aware," he says.

For many, parents filled out the applications, creating confusion about where the money came from, what a loan is and what the borrowing terms were.

Others adopt a live-in-the-moment mindset.

They reason "I don't know what this is and I know it won't affect me for years, and there's a party Friday night so I don't have to worry about this right now," he says.

The attitude, Prevost says, is a mixture of procrastination, refusal to be realistic and lack of understanding.

But, as with any loan, the lender does demand the money back. People must start to repay their student loans six months after leaving school — regardless of whether or not they earned a diploma.

Even those who decide to take a gap year or other break are on the hook for payments after the first six months.

Myth 4: A grace period is interest-free

That half-year before the first payment is due is dubbed the grace period. 

Perhaps due to its forgiving name, many students don't realize their government loans start racking up interest the day they finish school. (Certain provinces do not charge any interest on the provincially funded portion of a student's loan).

It's the most common misconception among recent grads, says personal finance blogger Yee, and they're often shocked to see how much more they owe once the grace period ends.

"The interest adds up," she says.

It's not mandatory. People can choose to start payments immediately or pay the interest as a lump sum after six months.

Myth 5: Repayment is not negotiable

The grace period is not the only repayment condition with wiggle room.

Students don't realize they can qualify for help, says Campbell. Instead, they consider their quoted monthly payment as gospel.

A student graduating with roughly the national average debtload of $25,000, who uses the grace period before making repayments at a three per cent fixed interest rate over 10 years, will have to pay just over $300 monthly, according to a repayment estimate calculator.

"There's help available" for students who struggle to come up with what they owe each month, Campbell says.

Typically, student loans are paid back over 9½ years, but debtors can choose to extend that timeframe up to 14½ years.

People can also apply for the government's repayment assistance plan. The plan either reduces or halts payments for six months depending on the person's financial situation.