Defer student loans?

[reedda]

I started back to school this month (company paid, YAY!), and have existing student loans. I received an unexpected email today that said my loan deferment was approved. I didn't apply for one, but apparently they received notice of my school status and did it automatically.

This got me thinking...

Should I accept the deferment and use the payments toward credit card debt?

I understand that interest will still accrue so if I decide to do this, I would still make the interest payments, at least.

Student loan interest rates are 4.625 and 7.65 (parent loan, also deferred)

Credit card interest rates are 18.4, 19.24 and 22.98

Advice? Thanks!

[bjl584]

Standard advice is to pay the higher interest loan first.

What are the amounts of your debts?

I wouldn't stop paying on the loans if I didn't have to. Interest will accrue on them while they are in deferment. I'd pay both the loans and the credit cards if I was able. The minimum on the SL's and as much as I could on the cards.

[anthai.lu]

Can you afford to pay the interest on the student loans as well as pay down your credit cards aggressively?

When in deferment, you will continue to accrue interest but you don't want it to capitalize and add on to your principle. Pay the interest if you can.

[reedda]

I actually can afford to continue making the entire payment anyway, and just continue paying what I'm paying on credit cards.

Here's where it stands, roughly:

Student Loan payment is $336/month. Parent loan payment is $186/month. Both of these can be deferred (one went into deferment automatically, as I mentioned). The interest payment, which I would still continue to make, would be about $88 and $30. Interest rates are 4.625% and 7.65%.

If I did my math correctly, I'd have an additional $404 per month with the intention to pay it towards debt.

Credit cards:
1: $ 639 / 18.4%
2. $2681 / 22.98%
3. $7026 / 19.24%

I'm paying min of $350 up to about $500 towards the credit cards per month (closer to the $350this month and next due to my significant other's reduced work hours and another payment obligation due in Feb).

What am I missing...Is there a downside to doing this?

[reedda]

I actually can afford to continue making the entire payment anyway, and just continue paying what I'm paying on credit cards.

Here's where it stands, roughly:

Student Loan payment is $336/month. Parent loan payment is $186/month. Both of these can be deferred (one went into deferment automatically, as I mentioned). The interest payment, which I would still continue to make, would be about $88 and $30. Interest rates are 4.625% and 7.65%.

If I did my math correctly, I'd have an additional $404 per month with the intention to pay it towards debt.

Credit cards:
1: $ 639 / 18.4%
2. $2681 / 22.98%
3. $7026 / 19.24%

I'm paying min of $350 up to about $500 towards the credit cards per month (closer to the $350this month and next due to my significant other's reduced work hours and another payment obligation due in Feb).

What am I missing...Is there a downside to doing this?

[breathemusic]

Maybe I'm missing it too.... it does seem to me like it would be better to put the loans on deferment and use that money to pay off the CC debt, but then you need to immediately take the loans out of deferment. Yes, the loans will still accrue interest, but they're doing that anyway. If you only started paying them recently, then most of your payment is going toward interest and not that much to principle, so delaying a few payments isn't going to make a huge difference. Especially if once you get rid of the CC debt you intend to pay off the loans faster than required anyway.

On the flip side, the CCs are charging crazy high interest and you could easily pay off most of that debt quickly if you had the extra loan payment money to throw at it.

Am I wrong people?

[musicprofessional]

That's a lot of CC debt, with some very high interest rates tied to your cards. If I were you, I'd see shop around for some new credit cards, with lower interest rates, and maybe do some balance transfers. There may be a 3% fee for the debt you move around, with a time period of 0% interest (6 months up to a 1 year or so), or no balance transfer fee, but just with a lower CC interest rate and no grace period. I'm not sure what your credit is like, but there many cheaper cards out there. Once you find a few and move the debt, I'd either put those high interest rate cards in a fire box where you can't get to them, or cut them up! By doing this, you can "stop the bleeding," paying all that high interest on your debt. Once that is under raps, then I'd take care of the student loans however you want. Even though you're working, try to save yourself some money...especially, if you're going back to school.