# Use student loan to pay off credit card debt



## mjw82704

A little background:
My husband and I have a huge amount of credit card debt. Neither one of us is great with our finances. We spend too much. I however am the one who manages the fiances. The reality of doing this keeps my spending under control. When my husband managed them several years ago I spent and spent without a care in the world. I feel horrible that I did that to him. Well now we are trying to get on track. The main thing I have always tried to get him to do is go back to school. This would definitely enhance the current job he has and make him more marketable so he could earn more money. He says he wants to go back but has not done it yet. I have my Masters and want to go back for more education to enhance my career but I am waiting on him. 
The issue:
I suggested that when he goes back to school and gets a student loan that we should use the excess funds of the student loan to pay off credit cards debt instead of sending it back to the lender, then of course cancel the credit cards that are paid off and start paying on that student loan immediately even though we don't have to and get these awful credit cards paid off.He does not want to he wants to just work on paying them off as we have been. But until we pay them off we are stuck in our house and unable to afford things or put money away for our child. 
My Question:
My question is who thinks this is a bad idea and why. I am just curious. He needs to go to school anyway and he will be getting a loan anyway.


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## swedish

Credit card debt is, in effect, is a high interest loan so it would make sense financially to consolodate to a lower interest loan. Even with the student loan out of the picture, it is a good idea to look into consolidating to lower interest cards, if possible, or at least make the largest payments to the higher interest cards.

The real question is whether you are both committed to paying down the debt and curbing the spending. It's very common for people to pay off debt and rack it right back up again, because they can and are not disciplined, and not uncommon to end up with even more debt than they started with.


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## MrsBaldwin

I did this about 2 years ago while getting my Master's degree. I had acquired a ton of credit card debt in college and while moving out on my own. I was able to maintain paying my bills, but took out the maximum loan amount (which for a Master's is quite a bit), so that I could pay down credit cards, car loan, etc. Within 2 years, I have now doubled the original amount of credit card debt that I had (simply because I now had it available again, and oops! life, and Nordstrom, happens!). Now 2 years later, I was stuck paying the high interest rate of the even higher balances, AND my student loans. About 6 months ago, I finally couldn't do it anymore and ended up filing for bankruptcy. Now I have NO credit cards, horrible credit (I had a 720 less than a year ago, and a 590 now). Basically, it's not a good idea to pay off debt by putting yourself into other debt. 

I justified it originally by being able to pay the debt for a longer period of time and a lower interest rate. But unless you have some serious will power, which I certainly didn't, I would strongly suggest against it. The last year of my life with my finances has led to health issues and am now even considering leaving my fiance' as a result. Be very sure that you can do it before you sign the paper.


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## turnera

Sign up for Financial Peace University. It's the best $90 you'll ever spend. Don't do more loan, just start this program and keep at it. It works.


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## created4success

turnera said:


> Sign up for Financial Peace University. It's the best $90 you'll ever spend. Don't do more loan, just start this program and keep at it. It works.


Turnera:

Yeah, it's a great program. My wife and I both went thru it and it's very helpful.

Some insight regarding using a student loan to pay off credit card debt:

Don't do it unless you have to. Sure, the rates are low. But here's the thing; if you have money problems, paying late or not at all -- though it could ruin your credit -- is an option. 

*With some student loans, there's nothing you can do to get out of paying it off, other than temporary deferral, etc.*


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## greeneyeddolphin

It's a good idea...if you can control you spending after. If you're going to use the loan to pay off the credit cards, close them, and then just re-open new ones and rack up the bills again, then it's a very bad idea. I would suggest if you do this, that you consider using some of that loan money to take a money management course, and that you and your husband both be involved in your budget and everything to do with your finances from now on. 

My boyfriend is an otr truck driver, so I pay our bills. But I still make sure he's as involved as possible with our finances and budgets, to ensure that neither of us can go crazy and spend money we don't have. It's just a good idea in general, even if for no other reason to make sure he's well prepared should anything happen to you and he needs to take over bill paying while you have an extended hospital stay or something.


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## Mom6547

turnera said:


> Sign up for Financial Peace University. It's the best $90 you'll ever spend. Don't do more loan, just start this program and keep at it. It works.


Yah I am with turnera here. The problem with loan consolidations is that we never FIX the over spending problem. It is one band aid after another.

Tunera is right. If not financial peace university then get Total Money Makeover from the library...


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## Scannerguard

> My husband and I have a huge amount of credit card debt.


and



> The main thing I have always tried to get him to do is go back to school. . .so he could earn more money.


RED FLAG! RED FLAG! RED FLAG!

This is a symptomatic treatment instead of addressing the cause.


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## takris

You should realize that if you haven't had an epiphany regarding your needs for your standard of living, but are working instead for more income, this short term fix will possible turn into a bigger problem down the road. Its human nature.

I started with my company while in college, and my wife and I struggled with living within our means. Fortunately, I found myself working for manager after manager who was really good with their money. Once guy drove an old beat up truck, and dressed in clean, but dated clothes. He and his wife liked nice vacations, but I assumed he was always broke. Once day, he told me about how stress-free his life became when he learned that he didn't need what he thought he did. He was a multi-millionaire.

Fast forward fifteen years later and I was approached by a close friend in desperate straits. My job centers around the implementation of lower cost new technology into future automotive programs, so I've had alot of financial training. He had a similar problem. He didn't address his needs and kept piling on debt while promising himself to be better. He learned finally when his sister, a VP of our company, bailed him out. 

By now, I'm debt free, but since I didn't learn this early enough, I'd estimate that about $35k per year of my childrens college comes straight out of my paycheck because I will not shortchange myself on my retirement planning. Yeah, sometimes I envy some of the guys who who drive the nice cars, but my little truck gets me around. My biggest comfort is that I've taught my children to be savers, and to be content with money in the bank instead of their driveway.

Please don't think I'm suggesting that you aren't smart enough to handle this. My encouragement is to think about how it might feel better to be able to get your monthly paycheck deposited and realize that you only need to spend about 20% of it to get by.


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## Wut2Do

Definitely don't do it...I'm in school and my wife and I have a fair amount of credit card debt. I have lucked out and really have managed to find the real cream of the crop business deals in my area to where I'll have ours paid off in the next 30 days including any student loans that I currently have existing. But before this happened, I contemplated exactly what you're thinking of doing.

In any case, DON'T roll over your cc debt into student loans. You can't declare bankruptcy and make those loans go away, unless you like become a quadriplegic or whatever the student loan guarantees say (which are a total scam, school would be way cheaper if this weren't the case).

You're better off working that much harder to make more money to at least pay a little more than minimum payments on them while in school. Yeah, most ends up going towards interest, but believe me, it disciplines you, in my opinion, in a way nothing else can. If you feel the pain associated with the debt, you'll be less likely to return to that state again in your life (or at least one would hope).


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## tattoomommy

I think this is a really hard decision. For my husband and I, we decided that we would use my student loan to pay off our credit cards. We don't have a problem with spending though. We have extremely high interest on our cards. We went into debt on those when I lost my job and used them to buy things we needed (groceries, gas, utilities) until we could get out of our more expensive apartment and find a place we could afford. For us, the solution isn't too bad because we have a tight budget and stick to it. It's hard to do, but it's important. 

I think if you'll do something like this, you HAVE to get strict on yourselves with spending. We use mint.com to help us track our spending and set up a budget. It helps to make sure you have "allowances" too. That way, you have a set amount you can each spend on whatever you want, or save it for something and you feel like you're not trapped by your budget. I think feeling like you can't get what you want is a huge reason people throw their budgets out the window and get into debt. Instant gratification is a killer and I hope for your sake that this transfer of debt isn't an instant gratification for you to spend more now. Sometimes the best solutions are the ones that take a long time. You learn a lot along the way and you'll never want to make the same mistake again and suffer for that mistake like you did again.


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## Soccerdad

That is a terrible idea. Tear up the cards anyway, stop taking out loans, and get your spending under control. If you ever were forced into filing bankruptcy, the student loan you're using to cover your credit cards would still be there and you'd have to pay them off. Call the credit card companies, and tell them you'll send them what you can until they're paid off.


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## SteppingStones

It depends on how disciplined you both are with paying off these debts.

I have been in school for a while now, I have a bachelor's degree and I'm working on my second degree which is a career based degree in the medical field. Up until I started this program, I never had any extra from my loans and had to pay the rest out of pocket. 

For the past two semesters (right after my husband and I got married) I have been attending a lower cost school and I have extra left over from my school loans. I'm still paying on the loans from the other school and we still are paying on the HUGE credit card debt my husband incurred before we got married.

I have one credit card, my dad used it to get my credit score up, I only ever used it for school books which I then paid right off. My husband isn't allowed to get a credit card in his name by court order. 

We have taken the extra money and paid off one of the credit card accounts he used to have and was still paying on. This spring we will do that again to pay off one of my private loans from the other school. We are also trying to sell his motorcycle to pay off more of his debt.

Yes we are shuffling the debt to a future pay off date as we are not currently paying on the federal loans I get. However, we will save money in the long run by transferring the debt to the lower interest rate AND we are paying off the higher interest rate debts faster. Then the money we were used to paying on those debts will be applied to my federal loans.


So it can work. IF you plan to NOT use a credit card AT ALL ever again, and IF you plan to "snowball" you're payments. Pay off a $100 a month card, take that $100 bucks and apply it to what you are paying on another card....


It all depends on how disciplined you are. AND you have to have a plan and you have to STICK to that plan. 

It's hard to do.


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## Zzyzx

Any payoff scheme requires self discipline. This goes double if you're going to use student loans to pay off credit cards because most student loans do not go away in bankruptcy. They are a huge scam that way as they have subsidized schools and colleges into raising their fees far beyond the rate of inflation.

One thing you can look into are pages describing actions you can take under the Fair Debt Collection Practices Act. YMMV.

One strategy that can help to rebuild your credit is to pay off the smallest debts first to get that marked as closed-paid off on your credit report as quickly as possible.

There are many resources on the web for frugal living. Peruse them.


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## nnoodle

Just an observation: 

Student loans MUST be paid regardless of financial situation. Your wages, accounts and tax returns can be siezed if you fall behind. 

Credit cards can be discharged in bankruptcy or in a "forgiveness" deal with the actual creditors.

The idea of using student loan money to pay off credit cards is ABSOLUTELY INSANE. Never a good idea.

And please note the guy above advocating student loans to pay cc debt is affiliated with a cc payment company.

Ask any financial planner. This is NOT a good way to handle overwhelming debt.


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## Sameold

Agree with nnoodle--also, the threshold for getting out of student loans for being completely and totally disabled is really high. Much higher than the threshold for, say social security disability. Don't put credit card debt into student loans. It's easier to get out of any other sort of debt if life throws you a curve ball than student loans. It would make more sense to use credit cards to pay off the student loans than the other way around--even though the credit card interest is higher.
Find some other sort of consolidation. Try your local bank or credit union.
Stop thinking best case scenario with student loans. Always think worst case. Sure, in the best case scenario you'd get a lower interest rate, etc. In the worst case, you're no longer capable of working in your field, you're getting minimum wage part time or you're getting disability, and can you pay those loans off? Because guess what, you still have to!


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## DTO

I don't know if this has been mentioned, but...

Note that credit card bills, in the worst case scenario, can be written off in a bankruptcy. That student loan debt will follow you until the day you die (it cannot be written off).

I think it's a bad idea.


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