Personal Finance Tip - Should I Use Student Loans to Pay Off Debt?

Personal Finance Tip - Should I Use Student Loans to Pay Off Debt?

Question by Daisy: How can I use my student loans to pay off my massive credit card debt? I’m a 19 year old college student that (stupidly) accepted a $ 9000 credit card. Over the last couple years I’ve been with and without a job and have brought the balance on that card up to $ 8000. I am now working part time but I only make about $ 500 a month if I’m lucky. Fortunately I live at home so I have no real expenses other than my gas and my credit card payments. However with commuting to school and work I’m using about $ 140 a month in gas. That leaves about $ 360 to put towards my credit card each month, so any unexpected expenses go on the card because there’s no income left to pay both the payment and for the expense. My minimum is $ 230 every month and even if I spend nothing on the card I still get hit with a $ 150 interest charge each statement. I’m going to community college full time and I’m using a combination of subsidized and unsubsidized loans to pay for school. For the fall semester I only got about $ 800 back and I put $ 300 in my savings and paid $ 500 on my credit card…which only paid off the books that I bought online. If I do nothing I’ll get $ 2000 in loans for winter semester and will likely get the same about back, however I’m going to modify the loan to pay off a chunk of that credit card. I understand that the loans are for student expenses; however I cannot work more because I am going to school and I need to use my income to pay for the things that are going on my credit card. I feel like I’m in a never ending cycle and if I get rid of the card and close the account I can just use cash for everything and be able to afford going to school rather than working just to pay off debt. If I pay every dollar I can between now and January I can probably get the balance down to $ 7000, and if I then get $ 6500 on my student loan I’ll be able to knock out the card fairly easily. I plan to close the account after that and only keep around my smaller $ 800 card (which has had a $ 0 balance ever since I paid it off 6 months ago) for emergencies only. Don’t try to talk me out of paying off the debt with student loan money. It really is a “living expense” because without this payment every month I would be able to afford my cost of living without the loan. Asking my parents to help pay off the card is also not an option. My community college is only about $ 67 a credit hour so I’m not concerned with the student loan debt being too large, people going to 4 year universities spend more on a single semester’s room and board. THE QUESTION IS: When I request a large loan amount they require me to itemize the expenses that I need the money for. What can I put on the list to equal $ 8500(original $ 2000 plus additional $ 6500)??? I realize that I don’t actually have these expenses but the school and lender don’t know that and I have no qualms with bending the truth. A laptop can easily cost $ 1200, books $ 500, tuition $ 1200 Some of the questionable expenses: Can I list these as legitimate expenses? Groceries $ 1000 Transportation (gas, car repairs) $ 1000 Rent $ 2500 If I can list all of these my total is still only $ 7400, what else can I list to equal the remaining $ 1100? Best answer for How can I use my student loans to pay off my massive credit card debt?:

Answer by MarcapPub
I would love to know how a 17 year old student managed to get a credit card with a $ 9000 credit limit. In any event, you are now in debt way over your head. So I would very strongly suggest that you seek the help of a financial professional in your area, who can advise you as to your best course of action, or else you will very likely continue to dig yourself into a hole, that you will not be able to get out of any time soon.

[student loans to pay off debt]

A ticking time bomb of American debt. Over 0 billion are owed by college students in the US with thousand more added on every second. The most traditional financial baggage for Americans was credit card debt. For the first time, debt belonging to college students has over taken that number one spot. "Students graduating in 2008, 2009 and 2010 are facing the worst job markets in a generation at least. And so you have people with more debt that we have ever seen before, who are having a harder time finding any job, let alone a job that pays them enough to somehow pay off all this debt."

http://tommieedgar.com// Drowning in Debt: US students helpless to pay off education

... down can help you feel as though you're making progress. Noting even $ 10 payments on student loans can motivate you to get the rest paid off. ... Student loans: 5 steps to pay down your debt. At the start of the summer, Sarah and I made a giant ... Student loans overwhelming? Make a chart to track your payment progress.

So you're attending college to try to build your career, but you find that your debts are distracting you from your studies. You might consider using your student loans to pay for your debt... but is this really a good idea?

When you sign a student loan agreement, you are telling your lender that you will use the loan to pay for expenses directly related to your education. This can include living expenses, and personal debts are arguably a part of these expenses. Your lender would likely not be pleased to learn that you used your student loans to make credit card payments, but if you incurred credit card debt as a result of being in school - say, you had to reduce your work hours to attend classes - it would be possible to argue that your debts were related to your education.

The problem comes when you finish school and you have to begin making payments on your student loans.

Although you may have saved credit card finance charges by paying your debts with your student loans, your loans have been quietly accruing interest while you were in school. By the time you have to begin making student loan payments, you will have incurred more in interest charges than if you had simply paid off your debts through part time or full time income.

If possible, it's a good idea to avoid using student loans to pay off debt. You'll end up paying much more in the long run - the debts you could have paid off in a year or two will hang around for a decade or more, building interest the entire time.

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