topic Re: Paid off CCs with Student Loans - Will lenders know? in Credit Cards

Paid off CCs with Student Loans - Will lenders know?

RoadRage — Fri, 25 Mar 2011 06:50:40 GMT

After months which became years of unsucessful lower APR requests, I gave up on the CC companies and paid off balances totaling $4500 @ 18% and 22% APR with a 6.8% unsubsidized student loan. The student loan sat for 6 months before I started paying it back during my final semester in college.

I have savings accounts and just landed a good paying job and have other accounts inluding a mortgage all on my credit report.

Will future lenders be able to see through me in what I've done? (the two cards were paid off in multiple payments over two billing cycles)

Yes my credit cards are paid off, but my total amount of debt owed remains the same to a degree.

I chose to do this as 6.8% in one account is more managable than 18% and 22% in two accounts, and was tired of carrying that debt.

I hope to start improving my score for a potential auto loan sometime this year through my new employer - a national bank.

My concern is, will the bank see what I did and see it as a negative in any way?

Re: Paid off CCs with Student Loans - Will lenders know?

DI — Fri, 25 Mar 2011 10:17:35 GMT

RoadRage wrote:
After months which became years of unsucessful lower APR requests, I gave up on the CC companies and paid off balances totaling $4500 @ 18% and 22% APR with a 6.8% unsubsidized student loan. The student loan sat for 6 months before I started paying it back during my final semester in college.

I have savings accounts and just landed a good paying job and have other accounts inluding a mortgage all on my credit report.

Will future lenders be able to see through me in what I've done? (the two cards were paid off in multiple payments over two billing cycles)
Yes my credit cards are paid off, but my total amount of debt owed remains the same to a degree.

I chose to do this as 6.8% in one account is more managable than 18% and 22% in two accounts, and was tired of carrying that debt.
I hope to start improving my score for a potential auto loan sometime this year through my new employer - a national bank.
My concern is, will the bank see what I did and see it as a negative in any way?

No, I did it 7 years ago and have and continue to receive new credit. In fact, back when I had credit problems, I told an attorney who had my collection account what I was going to do. He waited for the money and when I paid off the account, he list ed it as paid as agreed and removed all late payments. Some may say its immoral to use your student loans. Forget what others think! They're not living your life or your situation. Sometimes one has to do what one has to do! You made the right decison along with so many others who have done the same thing. 18%- 22% APR is too high.

I just hope now that when you use credit cards you get in a habit to pay them off in full monthly. Congrats!!

Re: Paid off CCs with Student Loans - Will lenders know?

valley_man0505 — Fri, 25 Mar 2011 16:29:30 GMT

No, you did the right thing. Not only is your interest rate better (however, it may cost you more in the long run if you only pay the minimum student loan payment each month since the terms are usually for 15 years), but your credit score will also be much better off. Student loans are considered installment loans, while credit cards are considered revolving credit. Your utilization rate (debt to available credit ratio) on revolving credit has a HUGE impact on your credit score. However, utilization rates on installment loans have almost no effect on your score. So, while your total debt remains about the same, you moved your debt from "revolving" to "installment", which is great from a scoring standpoint.

Re: Paid off CCs with Student Loans - Will lenders know?

cdtotten — Fri, 25 Mar 2011 16:31:42 GMT

Ironically I posted about potentially doing the same thing about a month ago and got absolutely BLASTED by the "high-ethics" crowd for wanting to make a financially smart move. Good for you.

Re: Paid off CCs with Student Loans - Will lenders know?

DI — Fri, 25 Mar 2011 16:37:56 GMT

cdtotten wrote:
Ironically I posted about potentially doing the same thing about a month ago and got absolutely BLASTED by the "high-ethics" crowd for wanting to make a financially smart move. Good for you.

Sorry you got blasted for wanting to make a smart financial decision. I hope you went through with it anyways.

Re: Paid off CCs with Student Loans - Will lenders know?

MarineVietVet — Fri, 25 Mar 2011 16:54:10 GMT

cdtotten wrote:
Ironically I posted about potentially doing the same thing about a month ago and got absolutely BLASTED by the "high-ethics" crowd for wanting to make a financially smart move. Good for you.

Are not opinions that differ from yours (or mine) equally valid? My opinion doesn't make yours wrong and vice versa. And my opinion doesn't bind or restrict anyone else from doing what they consider the right thing for them.

My view that SL's should only be used for paying off education expenses doesn't mean that another view is wrong; just different.

IMO trying to do the right (and yes ethical) thing should always be the first consideration and not how much money I can save. I admittedly often fail in my attempts at this but it's still my foundation for making decisions.

From a BK years ago to:
EX - 3/11 pulled by lender- 835, EQ - 2/11-816, TU - 2/11-782

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

Re: Paid off CCs with Student Loans - Will lenders know?

valley_man0505 — Fri, 25 Mar 2011 17:37:26 GMT

Marine, you are right that you have a right to your opinion. However, I personally don't feel it is not always "unethical" to do this. For instance, I got my undergrad from a 5 year program and I had scholarships that got me through 4.5 years. However, I ran short on money in the last semester and put some expenses on credit cards. Once I graduated, I got a job and started working and began paying down these CC's. I then decided to investigate graduate school, but I would not have been able to keep up on my credit card payments if I quit my job and went back to school....unless, I took out a student loan and used that money to pay off the cards. My choice was to either continue working at what I felt was a less than stellar job (I only took it because the job market was very bad in my field at that time) and pass up grad school in order to pay my credit cards (which were used for school related expenses) or I could quit the job, use student loans to pay my CCs, and further advance my education and career opportunities while riding out the downturn in the job market at the same time.

In fact, one of the main purposes for "unsubsidized" student loans is to allow students to have access to money above and beyond the school's cost of living estimate (which is covered by "subsidized" loans). Since the goverment is not paying the interest on unsubsidized loans like they do for subsidized loans, is there really any harm in using unsubsidized loans for personal purposes? It is not "free money" after all--you have to pay it all back (and then some) with your own money once you graduate.

Again, not trying to start on argument. You are entitled to your opinion, but I just wanted everyone to consider the other side of things before forming their own opinion. Just keep in mind that we are not alwasy privy to ALL of the details surrounding each issue posted on this board (nor should we be) and it is not always fair to form opinions without all the details.

Re: Paid off CCs with Student Loans - Will lenders know?

cdtotten — Fri, 25 Mar 2011 17:58:45 GMT

Marine, yes your opinion is valid and usually spot-on. I usually enjoy reading your responses as they are well thought out and articulated. And yes, I prefer to take the high road as much as possible in life. However, when there is an oppurtunity that comes across that could significantly help financially, but could be debated as ethical or not, it is sometimes hard to pass up. A cap of 6.8% for a student loan, as opposed to say someone paying 19.9% on a credit card is really hard to pass up. The point of student loans is to help you afford the cost of college (and all the things related to that expense). Most students take out loans to cover living expenses - and so I will never frown on someone using student loans for other purposes, as long as they legitamately attempting to earn a degree and will pay them back. As long as the government gets their money back + interest, they are happy.

Re: Paid off CCs with Student Loans - Will lenders know?

beamMEup — Fri, 25 Mar 2011 22:20:08 GMT

cdtotten wrote:
Marine, yes your opinion is valid and usually spot-on. I usually enjoy reading your responses as they are well thought out and articulated. And yes, I prefer to take the high road as much as possible in life. However, when there is an oppurtunity that comes across that could significantly help financially, but could be debated as ethical or not, it is sometimes hard to pass up. A cap of 6.8% for a student loan, as opposed to say someone paying 19.9% on a credit card is really hard to pass up. The point of student loans is to help you afford the cost of college (and all the things related to that expense). Most students take out loans to cover living expenses - and so I will never frown on someone using student loans for other purposes, as long as they legitamately attempting to earn a degree and will pay them back. As long as the government gets their money back + interest, they are happy.

Just remember the government's money is money I (and y'all) provide.

There are some of us who are not happy that you're being loaned money which we provide and are using it to pay off cc debt because you can.

And yes, I went to and paid for my own college. DH went to and paid for his own college. I still have kids in college, and yes they still work (full time btw) because they are not eligible for student loans - subsidized or unsubsidized.

I, for one, would like to see student loans being used as they were intended. Perhaps if folks weren't using them for unintended purposes, there would be more available to those who would be using them for intended purposes.

I always love it when folks claim to be ethical as long as its convenient.

* gingerly steps off soapbox. Texts son who is short on sleep due to full time college and full time job. My text: "Love you man, and am SO proud of you. xoxoxo Mom" *

Re: Paid off CCs with Student Loans - Will lenders know?

smc733 — Sat, 26 Mar 2011 04:06:07 GMT

Please... Because of the **bleep** ups of the current generation and baby boomers, the "current" adult generation 30-60 has no room to talk about us using the money they "pay in taxes" for student loans, they've borrowed enough from several future generations as it is...

There is nothing immoral about it, you used your credit card for daily expenses, I see student loans as ways to get through a 4 year period where you can't get reasonable income, this includes living expenses, not just tuition, housing and books.

Re: Paid off CCs with Student Loans - Will lenders know?

SCF — Sat, 26 Mar 2011 22:00:07 GMT

smc733 wrote:
Please... Because of the **bleep** ups of the current generation and baby boomers, the "current" adult generation 30-60 has no room to talk about us using the money they "pay in taxes" for student loans, they've borrowed enough from several future generations as it is...

There is nothing immoral about it, you used your credit card for daily expenses, I see student loans as ways to get through a 4 year period where you can't get reasonable income, this includes living expenses, not just tuition, housing and books.

The rules for student loans designate what they should be used for, and credit card debt (whether you built it up during school or not) is not one of those things. Now, clearly, you CAN do this, but is it immoral? Depends on under what circumstances your morality allows you to break the rules. There's really no right answer, but people should consider the fact that they are breaking the rules (even if they will never be caught, and the potential for harm of others is very low) when they do this.

Specifically to the quoted poster: If you think this situation is going to get any better if young people run around spitefully mis-using and abusing whatever they can get their hands on because they are angry that their parents and leaders made poor decisions, we're all in for a very hard run of it. I am a young person, and I do pay taxes, and I do have serious issues with misuse of student loans, because the government is being forced to cut other programs right now. Will I applaud the decision to mis-use government funds at a time when programs which I think give a much more substantial benefit that low interest refinancing of credit card debt, are being cut? No.

Lastly, and perhaps the most relevant. Your interest on your CC debt may be high, but if you get in a debilitating car wreck tomorrow, or you are diagnosed with cancer, those student loans are EXTREMELY difficult to discharge in bankruptcy. Is it a small risk for most people? Yes, but it's there, so you should consider it.

Re: Paid off CCs with Student Loans - Will lenders know?

haulingthescoreup — Sat, 26 Mar 2011 23:55:44 GMT

Student loans never, ever go away.

And I wasn't +1'ing just for that. SL's come with conditions. If you say you'll abide by the condtions, and then you don't, you're violating the conditions of the loan.

Not judging in particular, just observing.

edited out random comma

Re: Paid off CCs with Student Loans - Will lenders know?

RoadRage — Mon, 28 Mar 2011 06:03:16 GMT

I took into consideration the risk and responsibility that comes with student loans, hence why I took out only 60% of the full cost of a 4 yr education. The rest was paid by working and grants/scholarships.

Having paid off an $X vehicle over Y months at Z% interest, I used that as a baseline to know what I could afford to pay back at my current income rate. With a job that provides more than my previous income now and has excellent job security I have no worries about being unable to pay it back and started paying while in my last semester. Of the loans I took out, 80% went to tuition. The remainder toward CC debt.

Re: Paid off CCs with Student Loans - Will lenders know?

valley_man0505 — Mon, 28 Mar 2011 17:25:28 GMT

Walk into a bar in any college town once. Where do you think all the students in there get their "drinking money"? Yes, some of them have part time jobs that they use for their "fun money", but a majority of the people out having a good time in college are only able to do so because of student loans. I'm pretty sure student loans are not for alcohol/strip club/spring break vacation purchases. My point is that lecturing someone on "misuse" of student loans is like stopping every jaywalker on the street and reminding them that what they are doing is illegal. Personally, I'd rather see someone "misuse" their student loans by paying off a debt than watch them using it to drink shots out of a girls navel. I know plenty of people in college who were literally spending thousands of dollars a semester in the bars--it is much more common than people think.

Also, ever been to a casino? Maybe I should stop and lecture all of the retired people using up all the social security money I have been contributing out of my paychecks that will no longer be around when I ~~graduate~~ retire (EDIT-OOPS). Not trying to open another can of worms there--just sayin'.

Re: Paid off CCs with Student Loans - Will lenders know?

jefftca925 — Mon, 28 Mar 2011 14:39:26 GMT

I'm just gonna throw one word into the mix of this conversation... KARMA. If you think you can get away with something, always remember that Karma is waiting right around the corner for you. Good words to live by in my book :smileywink:

Re: Paid off CCs with Student Loans - Will lenders know?

smc733 — Mon, 28 Mar 2011 14:59:21 GMT

But what about private loans? Does anyone think it is immoral in that respect? Look, I've never used my student loans to pay for anything in addition to school, as it is fiscally irresponsible... but my school allows you, if your loan paid > what you owe, to take it in a check. So many students cash them and go on Ski trips, I cash it, then write a check to the highest interest rate loan I've had so far.

IE. This semester, my PNC loan was $1400 above what I owed, I cashed it, and wrote a check for my MEFA loan, which has a much higher interest rate. But I still feel the OP is under no moral obligation to do anything, because if this wasn't allowed, how can they withdrawal it? I know the loans all state they can be used for living expenses while in college.

Re: Paid off CCs with Student Loans - Will lenders know?

ifinet — Mon, 28 Mar 2011 17:21:18 GMT

Theres no question that what OP did is immoral and illegal, but at the same token SL is permanent and that the creditor wont go harmed unlike credit card thingy.
Moreover, this scenario is synonymous to bypassing a traffic light by cutting through a gas station on the corner; some call it illegal, some dont; some cops pull u over for that, some dont ;-)

Re: Paid off CCs with Student Loans - Will lenders know?

DI — Mon, 28 Mar 2011 18:39:48 GMT

I used my credit cards to pay for my tuition to avoid paying late fees while I await for the student loan. I received the student loan and paid the credit cards off. What wrong with that? Nothing!!

Re: Paid off CCs with Student Loans - Will lenders know?

haulingthescoreup — Mon, 28 Mar 2011 20:59:36 GMT

DI wrote:
I used my credit cards to pay for my tuition to avoid paying late fees while I await for the student loan. I received the student loan and paid the credit cards off. What wrong with that? Nothing!!

Exactly, because you used your CC's to bridge your expenses while waiting for the SL check to come through. I see nothing wrong with that, either.

If someone has CC debt for remodeling the kitchen or something and applies SL funding, that's different.

SL money is meant to be used for student expenses. These do cover things beyond tuition and books, IMO --students have to have somewhere to live, and something to eat.

To me, the difference comes when I read a post (not saying it was this one; I'm not going back and re-reading; but I've read other posts) which says, "I've got $10K of CC debt at 19.9%, and I can get an SL for 4%. Should I move the CC debt over to the SL?" In this instance, there's no indication that the CC debt came about while trying to survive as a student.

If people use their SL money for non-student costs, there's that much less left for other students who really do need it for their education, and they wind up being forced into private loans and so forth.

I think that many people who have used their SL money for non-SL purposes might not have thought all this through, and maybe missed the bit about the money being meant for their education.

In the end, each person has to answer to his/her own conscience. I'm actually glad to see threads like these, because it does make people start thinking about the issues. I know it did for me the first time I read something like this.

It's your decision. It wouldn't be mine. Just sayin'.

Re: Paid off CCs with Student Loans - Will lenders know?

clocktick — Tue, 29 Mar 2011 03:23:14 GMT

I'd like to know Suze's opinion on this!