Wise use of loan money?

[Jori_Carver]

I was offered a student loan of about 9k for the spring term but only need about 2k. I was told that money is mine to use not only for school stuff but living expeces. The rate is 6.8% for 120 months, $160 per month. I have three credit cards which have rate in hight teens and low twenties with a combined minimal payments of about $400. The loan anount after I pay school would pay off either one CC with $162 per month, or two of the other I mentioned with $241 per month. While at school I have to pay interest only on the student loan. I'm very tempted to take the money and pay off or at least pay down the cards and not use them at all. We're comming out of a job loss and I decided to return to school hence the credit card debts.

The savings could be substantial and the interest on the student loan is tax deductible.

Would this be considered a good financial move? My worry would be that I would be tempted to use these cards. But I would xefinetelly shred and cancell two of them. The third one is reward card with good points balance.

Thanks.

[JoeP]

What is your source of income now, and how much do you net a month?

What is the balance on the credit cards?

Do you have any student loans, if so, how much and rate?

[bjl584]

Paying off debt with debt is not a good habit to get into. I'd pass on this despite what sort of interest you might save.

First,
There is nothing stopping you from running the credit cards right back up again.

Second,
Student loan debt is not forgiven through bankruptcy. If you ever needed to file then this debt would stay with you.

I suggest posting up a budget and let the people here on the boards come up with a way to help you pay off your cards and keep them from getting racked up again.

[dczech09]

I agree with bjl584 that getting into the habit of paying off debt with debt is bad.

Do not focus on the fact that student loans are not discharged in bankruptcy, unless of course you are planning on bankruptcy in the near future.

What I would do is fist make sure you are on a budget. You have to know where your income is going. Where did the credit card debt come from? Was it from overspending? Do you spend too much for your income level?

Once you get on a balanced budget, then using student loans to pay off the credit card could be beneficial. It will only be beneficial if you avoid charging up the cards again. Maybe you should consider cutting up the cards.

You need to focus on setting a budget regardless. Before you can worry about getting the water out of the boat, you have to first plug the hole.

[lhkorn99]

my opinion is that it could make sense - but would only do it if you cut up the credit cards after paying them off so that you don't fall into bad habits like others mentioned already.

[theduc]

if your plan is to cut the cards up you can do that now... there is no need to wait until you pay them off to do this.

as for using the student loan to pay off the cards... I'm not sure if it's something I would do. If you only need $2K then don't borrow $9K.

[Gailete]

My son got caught in that trap. Using loan moaney for living expenses and I don't even want to know what he is having to pay off at this point. If you only need $2K, take $2K And I you can find a way to not use it, forgo the loan entirely. Sounds like there is more than one of you, so hopefully with what you both can earn you can work on paying off your credit cards and school loans as you go.

I'm surprised how few students go the 'starving student' route any more. As someone that did it, let me tell you I appreciate my schooling so much more than if I had walked out owing thousands of dollars that would hang over my head for years. Absolute frugality while going to school can set you up to be very frugal those first few years starting out with a job, etc. It develops a mindset within you and sticks with you for years. I realize from the sounds of things you are older than just HS grad, but I see articles every year at back to school time of all the 'stuff' kids are taking to school and it is like they are heading off to some posh finishing school than college.

[reedda]

I wouldn't do that if I were you....

I got caught up in that as well, and now have over I $50k in student loans to pay off...it is way too easy to spend that money and not think about it until later. I wish I could go back in time...

My advice is to stay strong and only borrow what you need to.

[~bs]

Paying off debt with debt is not a good habit to get into. I'd pass on this despite what sort of interest you might save.

First,
There is nothing stopping you from running the credit cards right back up again.

Second,
Student loan debt is not forgiven through bankruptcy. If you ever needed to file then this debt would stay with you.

I suggest posting up a budget and let the people here on the boards come up with a way to help you pay off your cards and keep them from getting racked up again.

Wise post.

[~bs]

My son got caught in that trap. Using loan moaney for living expenses and I don't even want to know what he is having to pay off at this point. If you only need $2K, take $2K And I you can find a way to not use it, forgo the loan entirely. Sounds like there is more than one of you, so hopefully with what you both can earn you can work on paying off your credit cards and school loans as you go.

I'm surprised how few students go the 'starving student' route any more. As someone that did it, let me tell you I appreciate my schooling so much more than if I had walked out owing thousands of dollars that would hang over my head for years. Absolute frugality while going to school can set you up to be very frugal those first few years starting out with a job, etc. It develops a mindset within you and sticks with you for years. I realize from the sounds of things you are older than just HS grad, but I see articles every year at back to school time of all the 'stuff' kids are taking to school and it is like they are heading off to some posh finishing school than college.

IMO the starving student role is the route most students should be taking. Builds character, allows one to learn how to live on very little money, etc. Unfortunately, they're constantly tempted with "easy money", which can and will set them back years when the wrong decision is made.

[Gailete]

IMO the starving student role is the route most students should be taking. Builds character, allows one to learn how to live on very little money, etc. Unfortunately, they're constantly tempted with "easy money", which can and will set them back years when the wrong decision is made.

Absolutely. I went to college before credit cards were popular and maybe only rich people had them since middle class and below knew they couldn't pay them off. I also went to college in a foreign country and couldn't work off campus other than babysitting jobs. I still managed with juggling a lot of on campus jobs and things like typing term papers, to completely pay off college before I graduated. I don't ever hear about kids doing that any more and it used to be the norm. It meant that when I could only land a job at Arby's after graduating, that I was able to support myself with part time (at first)/minimum wages. Does anyone like being poor. Not really, but it does make you a stronger person in the end.

If you don't know what you want to use a loan for, then you don't need the loan in the first place. Just because you can get one doesn't mean that you should. It isn't free money, when it is coming out of your pocket back to whoever loaned it to you, it will cost you more than they gave you.

[DinoSaur]

Although, wouldn't paying off debt with debt be beneficial if the initial debt is on a higher interest that than the offered one? I'd say have a look at the total repaid amounts from this point for both options, and go with the way that pays less in interest.

[Wino]

Two thousand dollars is 200 hours at $10 per hour. That's 5 weeks full time or 10 weeks half time, or 20 weeks working only two hours per day/night per five-day week.

It sounds to me like a part time job would be an easier route than borrowing for this. Have you considered delivering pizzas, tutoring, or other part time work? Why get a debt now that you don't need?

[~bs]

Two thousand dollars is 200 hours at $10 per hour. That's 5 weeks full time or 10 weeks half time, or 20 weeks working only two hours per day/night per five-day week.

It sounds to me like a part time job would be an easier route than borrowing for this. Have you considered delivering pizzas, tutoring, or other part time work? Why get a debt now that you don't need?

Yeah, this is the route I took. I stayed in-state and worked full time and went to school full time as well. Ended up having enough money for a downpayment on a place by the time I graduated and was able to pay tuition yearly.

One of my friends thinks that I ruined my college experience since I didn't go with the out-of-state college & partied up routine. Honestly, she's probably right. But she's also the one who's 30 years old and still making student loan payments. To each his own, i guess...

[maryadavies]

Sadly I can echo what everyone else has been saying about this, with a twist. I meant to use as little of my student loan money as possible (since I kinda had no say in how much I got) and then use it to make a huuuge payement on my loans when I got out of college. The problem was..My parents got into some serious money trouble and started coming to beg me to give them money! >< I was always upset but in the end, I'd have to give in. They'd often take almost all of it, leaving me with barely enough to scrape by.

I got lucky. I got them forgiven due to disability (tho that's another story and is the one good thing about the crap I've had to go though) but it could of been much worse. I would strongly suggest that you don't use that money. If the fin. aid office won't let you cut your loans down, put the leftover in a savings account and don't touch it! You can always just give it back when you're done as a first payment. Also hope you don't have parents like mine who come to you with their hands held out...I don't think they realized what they were asking for.