“Is taking out a student loan and using it to pay off most debts or at least ‘control’ the debts a wise idea in the long run?” – D
First, a technicality: You can’t actually use a student loan for this purpose. Student loans are usually awarded with the stipulation that you use them for school-related expenses only. But, what you can do (and what I assume you’re asking) is get a student loan, and take the out-of-pocket money you were going to use for tuition/books/etc., and pay off/pay down your debts with that.
To know if this is a good idea, you really need to ask yourself some questions first.
How much student debt am I willing to take on?
If it were me, I wouldn’t go this route, because I’m already staring down the barrel of $40,000 in undergraduate debt. But if this loan will still leave you with a “comfortable level” of student debt, you might be alright. The MSN Money article “How much college debt is too much?” can help you calculate how much college debt you can safely take on.
What am I using this money to pay for, exactly?
From your question, I’m guessing you’re looking to pay off credit cards, or possibly a car loan. Either way, some kind of consumer debt. Understand that there’s a difference between these kinds of debts. Namely, a student loan never goes away. Even if you file for bankruptcy. And although a student loan rate may be more favorable, it also has a long repayment term (10-30 years).
Can I stop accumulating debt?
If this is consumer debt, then you will need to stop once you get the loan. Stop carrying a balance on your credit card. Or, if it’s a car loan, then you can’t run out and trade in your car for a new one just because your loan is paid off. If you feel you can exercise the needed amount of restraint, then alright.
How’s my credit?
If you’re getting this student loan through a private institution (a bank rather than the government), and your credit history isn’t very long, you’ll likely need a co-signer on your loan. A co-signer will be on the hook if you don’t pay the loan, so whoever it is needs to know your intentions with this loan.
Alternately, if your credit is good, you have another option. Get a credit card with a 0% intro APR on balance transfers, and move your debt over there. This is really the better option, if your credit is good enough.
Does this seem like a good idea to me?
How you feel about this is actually very important. The fact that you came to me with this question means you’re having doubts. After you think this through, if you’re still doubting it, then it’s probably not a good course of action. After you’ve considered your situation, your gut instinct will help you find your conclusion.
Remember this too: student loan debt is one of the 5 kinds of debt you can’t get out of by declaring bankruptcy. You have until you pay it off or die (and I’m not actually sure what happens to the debt if you die).
Don,
Right. And yes, it does go away if you die, also if you become disabled. But that’s it – you have to die, become disabled, or pay it off.
OK…I’ll take the contra argument here. On the surface the gut says no, but I think you can make the argument the other way, too. For instance, if you are replacing high-interest credit card debt (20+%) with guaranteed rate student loan debt (Stafford capped at 6.8%, Perkins capped at 5%, etc.), then it may not be a bad idea. Of course, it would also mean cutting up the credit cards and not using them again – or you will find yourself in the same situation in another year.
Also, while student loan debt cannot be erased through bankruptcy, the interest you pay can be deductible on your taxes. So, you could be moving non-deductible interest from your credit card and/or car loan to deductible interest from student loans.
In short, I don’t think that there is one RIGHT answer that blanket applies to everyone, but it is good to seek counsel.
Good luck.
if you die and you have a co signer they are responsible… i thought about faking my own death until i found out that my brother would be stuck with my 80k…
LOL @ jos
It seems like a debt consolation. Debt is debt all you are doing it moving it around.
Change your behavior about money so you want slip in debt again
Student Loans have lower interest rates. Given similar amount, or maybe more debt, than what you plan to take out on the student loan, it will almost always make more sense, since the debt you are effectively paying off is of higher interest than a student loan’s.
However, since it is rare that you have that much left over in a student loan package after paying for school, I don’t advise this as a method of getting lower interest rates.
I think the thing about student loans is that most people are going to be actually be more in debt later so it’s probably wise to take the cheaper debt not instead of borrowing more at higher cost later. This is of course assuming you won’t waste the money…
Student loan debt is good if you can get college done with because of it. But it is still debt. no mater how you look at it.
I would say get out of debt of all kinks so as to not have to pay intrest. Pay intrest bad keep more of your hard earned money good.
looking back now I should have invested it instead of paying of debt, but with the low intrest rate and the grace period, its appears to be a very smart thing to do. Too bad bankruptcy won;t erase it.
A co-signer will be on the hook if you don’t pay the loan, so whoever it is needs to know your intentions with this loan.
Diligent savers can use student loans to their advantage. The real answer is: it depends. However as a rule of thumb, the lower the interest rate on your loans, the better off you’ll be just paying the minimum monthly payment and nothing more. Take the extra money you were going to pay on your loan and invest it instead.
DON’T GET STUDENT LOANS, EVER, EVER AND EVER…
you will be not only in Debt up to your eyeballs, you will be ASSURED of a life of indebted SLAVERY AND POVERTY till you die,
and its not the loans you take out, its the INTEREST that they COMPOUND AND COMPOUND, until one day, you find you are paying a million for a thousand dollar loan, this is NO JOKE,
its called Predatory Lending, its the biggest CORRUPT SCAM IN THIS NATION, where the wealth ‘ELITES’ in bed with GOVERNMENT
DELIBERATELY have set up a system where their EXTORTED WEALTH
is on the backs of the DUPED WHO WERE STUPID ENOUGH TO BELIEVE THAT EDUCATION = THE AMERICAN DREAM.
COLLEGE IS A TOTAL WASTE OF TIME AND ITS NO GUARANTEE THAT YOU’LL BE BETTER OFF, and in FACT,
STATISTICALLY, unless you are from wealthy family OR ARE A MINORITY, [who can get the scholarships/jobs, etc], you are most likely to find yourself lower class-to lower middle class, and IF you went to school as low income student,
believe me, you’ll STILL be low income [guaranteed if you are single mother or have kids while attending college],
AND WORSE OFF, AFTER COLLEGE.
if i had to do it all over again,
I WOULD HAVE STAYED ON WELFARE, SOLD DRUGS, AND DONE WHATEVER CRIME THERE WAS TO GET OUT OF POVERTY,
I MAY HAVE DONE TIME IN PRISON, BUT THAT TIME, WOULD BE FAR LESS AND MY KIDS BETTER OFF, BY TIME I GOT OUT,
THAN THEY ARE NOW, AND THERE IS NO WAY, NO WAY OUT…
I MAKE LESS MONEY NOW, WITH COLLEGE…THAN I DID WHEN HOMELESS AND ON WELFARE AND BTW, I WAS WORKING WHEN HOMELESS AND ON WELFARE…
THE MOST STUPID IDIOTIC THING I EVER DID,
WAS GO TO COLLEGE THINKING IT WOULD MAKE A DIFFERENCE…IT DID ALRIGHT,
IT ENSNARED ME INTO A LIFE OF BONDAGE AND POVERTY AND, A LIFE OF DEPENDENCY ON WELFARE [UNLESS I WORK UNDER GRID AND SELL DRUGS OR GET INTO TERRORISM AND BELIEVE ME, THE THOUGHT HAS CROSSED MY MIND],
ITS NOT WORTH IT. LEARN TO DO WITHOUT,
IN AMERICA…THE DREAM IS AN ILLUSION…THERE ARE EXCEPTIONS, THEY ARE VERY RARE,
its CAPITAL BABY AND IF YOU DON’T HAVE IT OR DON’T HAVE THE MEANS TO EXTORT TO HOARD WEALTH [LIKE SALLIE MAE, ET. AL DO]
FORGET IT…
BETTER OFF POOR,
THAN POOR AND ENSLAVED TO UNCLE SAM.
NO TO STUDENT LOANS…UNLESS YOU ARE ONLY 18 AND NO FAMILY…FORGET IT,
NONTRADITIONAL STUDENTS, RUN, RUN AS FAST AS YOU CAN AWAY FROM COLLEGE,
YOU’D BE BETTER OFF DEALING METH.
THATS PATHETIC YES,
BUT ITS THE DAMN TRUTH. WELCOME TO CAPITALISM.
@Tasha: Your use of caps lock obviously justifies your reasoning.
@Jeff:
🙂
You’re an idiot. Just because you had a bad experience, you’re whining about how college is evil and it’s going to take away everything. Maybe the problem isn’t with the institution, but with you. ANY loan you take out EVER will compound interest. And most bills you have to pay. Yet most people are coping just fine. So maybe you need to reevaluate your priorities. Maybe you should actually try to pay things off instead of whining on the internet about how much you hate everyone. Maybe if you stopped whining and got up and MAYBE thought positively about the world around you, you wouldn’t be so damn unhappy all the time. Jeez.
And also.. You have kids and you’d rather be dealing drugs?? What a great example that would set for them. I’d much rather my kids know that I’m trying my hardest. I don’t know why ANYONE would rather spend time in jail than with their beautiful children.
Student loan consolidation rebate rebates are usually given by a private company when student loans are consolidated equaling more than $20,000. The more student loans consolidation, the higher the student loan consolidation rebate. This is usually a percentage of the principal loan balance that is either applied to the outstanding loan or sent to the borrower as a cash payment. This can be a very attractive offer, especially when in the form of a cash payment to the borrower.
Student loan consolidation can have many benefits for the career minded student. With the prices of things going through the roof, going to college can be very costly. Many students don’t have thousands of dollars to pay their way through college.
“You can’t actually use a student loan for this purpose. Student loans are usually awarded with the stipulation that you use them for school-related expenses only”
HA what a load of balls. i spent my student loan on drinks, xbox games, cds and dvds. it never ONCE went on a school book. so the REAL answer is:
YES you can use your student loan to pay off other debts. but its probably a better idea to try the bank.
debt is debt, robbing Peter to pay Paul wont solve the problem. You must change your attitude toward money
Tasha,
I’m sorry that you had a rough time at school I am also non-traditional, thanks to the selective deafness of FAFSA to reality, but loans are NOT the only way, nor are they the problem. Neither is education, unless you go to school for four years to be an actor (which means you were warned you’d be waiting tables a while) or to major in something almost entirely useless, like a culinary degree (no offense to you culinary majors, but I had to work with some of you and we made the same money. They paid to learn it and I just worked there a year and got a raise.) The problem is blowing caution to the wind, taking any loan they offer you at the maximum and being a money funnel. If you lowered the class load to just enough hours to qualify as full time while you work part time, you wouldn’t have had so much debt. But if you think prison and drugs are the answer to happiness, by all means, go for it. It just proves that some people don’t really want to leave the slums, so they barely try, they fail, and then they blame the system so they can return to the slums. What you say makes me think you are just one of those who think the system is there to wipe your nose and put money in your pocket for nothing. That’s called Communism, and if you ever read a book about it, you’ll find out it fails everywhere it’s been tried, right along with National Healthcare. Capitalism is benefiting financially from your own efforts. I’m sorry that the idea of working hard and saving for the future is like kryptonite to you, who used to suck my taxes up with your druggie welfare mom plan. If this is the result of welfare, then no wonder the economy is suffering.
I am in a similar situation and have decided to use my extra student loan money to pay down very high interest credit card debt. I would just like to say that having credit card debt does not mean you are an irresponsible fool. Sometimes responsible people get into debt through things out of their control. For me it is logical because the interest rate on my student loan debt is fixed while my credit card interest rate is extremely high. Yes debt is debt and I will just be shifting it around, but it is a sensible shift because it will save me money in the long run. If you have a solid plan for not getting into the same situation again next year I say go for it. Yes, cut corners and be responsible with your money, but remember that getting into debt doesn’t automatically make you a bad person or an irresponsible one. College is the best thing I could have done for myself and the career path I have chosen makes it highly likely that I will make a vast amount more money than if I hadn’t gone to college. Good luck!
All the money speculation is a bunch of hog wash. If I want something on this planet the only person stopping me is myself. I think it depends on what does your conscience allow? Some can be hitmen for the CIA their whole life and feel like money nor morals were never an issue.
When looking for a way to deal with student loans debt, it’s important to understand the different loans you have and formulate a plan to deal with and pay off each of those loans in the best way possible.
You definitely SHOULD NOT take out a student loan(s) to pay off debt. As another person noted, student loan debt is one of the very few types of debt that CANNOT be discharged in bankruptcy. Read “The Student Loan Scam” by Alan M. Collinge about the horror stories of oppressive debt.
I disagree with the majority of posters here. I think it is a good idea to use a student loan to pay off other debt.
I owed about $15000 in credit card debt (about 9 cards) when I began graduate school. I couldn’t go to school and make any sort of dent in my debt when you consider the interest rates. So I dropped out of graduate school and worked full time for the next three years. Over this 3 years, I paid off most of my credit card debt except for the last card which was about $6000.
I then re-entered graduate school and got my master’s in a year and a half.
Here’ the kicker. I then reapplied to another Master’s program for the sole purpose of dropping out at the first or second week of the semester. I never wanted the second graduate program. I just wanted the loan money so I could use it to pay off that last credit card which I had been paying off via a collection agency! So instead of paying off a credit card debt with a high interest rate, the debt just transferred to a student loan where the interest rate was much lower!!!!!!!!
I plan to get extra student loans so I can pay off my 9 credit cards (down from 13). It’s very hard to concentrate on school with Chase and Citicard calling to bother me about paying my CC bills.
I’m not gonna keep paying high interest and late fees on the off chance that I might need to file bankruptcy at some point in the future.
When the student loan proceeds go into my bank account and mixes with other income, I don’t know who is gonna check which money was used to pay educational expense and which was not.
… and to continue.
Yes it is true that bankruptcy does not cancel student debt. However sometimes you have to roll the dice. In the end my student loan debt total (for both undergrad and grad) rose to about 40,000 after leaving it on forbearance for a period of about 3 years before starting to pay it off. It would have been about 32,000 had I not applied for that second graduate semester loan that I never used. Now compare that 8000 loan difference to a 6000 credit ccard balance. Those credit card interest rates will kill you!!
I learned the hard way to pay off credit card bills in full each month (if you can’t afford it, DON’T CHARGE IT!!!!!). I now have about 75000 in savings and have decided in the next day or two to completely pay off my remaining 29000 student loan balance.
My message: there is nothing wrong with using student loan money to pay off a credit card if you are sure you can avoid further credit debt acccumulation. I would not be where I am now if I had not done that!
If I could just win the lottery I would be ok lol
I used student loans to pay off some of my credit card debt, and it was one of the best decisions I ever made. In fact, if I’d thought of it one semester sooner, I’d’ve been free of consumer debt for almost a year. Sigh.
Yes, you can’t discharge student loan debt through bancruptcy. But, 1) the interest rate is fixed and relatively low, 2) it doesn’t affect your credit score as negatively as consumer debt, 3) you can write off the interest, and 4) they can never force you to pay more than you can afford to pay – worst case scenario is income-contingent repayment, and that’s after you’ve used up forbearance. As long as you communicate with your lender, they will always, always work with you – which is more than can be said for a credit card company.
I will be doing this then!
I dont know, in my opinion stuff like this only pisses me off. Student loans are hard to deal with imo
I’m going into a job field after my Master’s program that will qualify for the Public Service Loan Forgiveness program. After you pay the loan on time for 10 years, the remainder of the loan will be totally written off.
My question is this (and I really need to research this myself, but I figured I’d start here): Is it a good idea to shift my approx. 15k of credit card debt over to this loan? It seems like a no-brainer because it will be forgiven eventually, but I want to be SURE that it will be forgiven and I need to determine exactly what types of loans are forgiven and if you have to provide the federal government with any detailed information about your use of the loan. Any info you guys have would be nice, especially if someone else has tried this. 🙂