Student loan check recieved in mail...tuition already is paid, should I use to pay credit card?

[Anonymous]

I didnt know where to post this so i posted it in the student loan and credit card section... 

Hello I have some questions regarding student loans and it also touches on credit cards...let me give you the background, I am back in school for my masters degree, i have $20,000 in student loans from my undergrad that are consolodated at 3.5%, they are currently in deferrment while I am back in school and I am paying off the interest that accrues every month.  I also have $9,800 on a credit card that I am working on paying off, it is at 1.99% until january, then it goes to 5.9% or i can transfer it to another card that offers 0% or 1.9% when january comes around.

I recently got married and my wife works at the university that I go to school at and one of the benefits is that she recieves is tuition remission for family.  She recently decided that she wanted to start looking for a new job and if she possibly found a job in the middle of the semester the university would have taken away the tuition remission and i would have had to pay the bill.  So as a backup I applied for a student loan in case she left her job, long story short, she is staying at her job for at least this semester and the tuition remission has paid my tuition bill and today i recieved a check in the mail from the university for the amount of the student loan.  I know I can just pay the loan back right away, but I was wondering if people think it would be a good idea to use some of the money to pay off my credit card bill, I know credit card debt is worse than student loan debt and if i got rid of the credit card debt i could bring my scores up and it would look better when we start looking for houses.  My credit scores in June were 765 Equifax and 744 TransUnion which isn't bad but I really don't want this credit card debt hanging over my head and if student loan debt is looked at more favorably than credit card debt does this make sense?

[BP2003]

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@Anonymous wrote:

I didnt know where to post this so i posted it in the student loan and credit card section... 

Hello I have some questions regarding student loans and it also touches on credit cards...let me give you the background, I am back in school for my masters degree, i have $20,000 in student loans from my undergrad that are consolodated at 3.5%, they are currently in deferrment while I am back in school and I am paying off the interest that accrues every month.  I also have $9,800 on a credit card that I am working on paying off, it is at 1.99% until january, then it goes to 5.9% or i can transfer it to another card that offers 0% or 1.9% when january comes around.

I recently got married and my wife works at the university that I go to school at and one of the benefits is that she recieves is tuition remission for family.  She recently decided that she wanted to start looking for a new job and if she possibly found a job in the middle of the semester the university would have taken away the tuition remission and i would have had to pay the bill.  So as a backup I applied for a student loan in case she left her job, long story short, she is staying at her job for at least this semester and the tuition remission has paid my tuition bill and today i recieved a check in the mail from the university for the amount of the student loan.  I know I can just pay the loan back right away, but I was wondering if people think it would be a good idea to use some of the money to pay off my credit card bill, I know credit card debt is worse than student loan debt and if i got rid of the credit card debt i could bring my scores up and it would look better when we start looking for houses.  My credit scores in June were 765 Equifax and 744 TransUnion which isn't bad but I really don't want this credit card debt hanging over my head and if student loan debt is looked at more favorably than credit card debt does this make sense?

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I just started grad school myself, and got married on this past Aug. 1st...and got my student loan refund on Aug 24th (I also have about $12K in student loan left from my undergrad work).  I used my refund check to pay off credit card debt built from wedding expenses.  Saw a pretty nice jump in my credit score after having high utilization throughout wedding planning months.  Student loans are installment accounts and won't factor into your overall util like your revolving cc debt.  Take care of the CC debt first! 

Besides your student loans have a great interest rate that won't fluctuate like those pesky CC interest rates.

[DI]

Congrats on everything! I wouldn't use the loan to pay the credit cards if you're not planning to change your credit card usage habits.  You are going to be in more debt. 

[BP2003]

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@DI wrote:
Congrats on everything! I wouldn't use the loan to pay the credit cards if you're not planning to change your credit card usage habits.  You are going to be in more debt. 

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If you are using excess school loan money to pay off revolving debt, is it such a bad thing to move debt to a less "abraisive" intallment account?  If you're going to have some debt, wouldn't you want it to be as painless as possible?

I'm interested to hear anyones thoughts on this...

[Sparkz1920]

I used my check to do that because i wanted to app for government jobs and of course, they run checks.

But this check, ill use a little bit of it to pay my cards down, which might be only 200 or so dollars because i dont have high limits and dont use my cards like that. Then the rest into a CD, some in a christmas fund, and some for myself.

If u are going to change your habits, then go forth with it. Smaller interest rate than most cards and when you pay back loans, they underdtand you, whereas credit cards could care less if u are homeless on the street...

[Jazzzy]

Hi...I'm also in grad school. Done in May...yeah!

I had not planned to take school loans. We could have made it without them...a much tighter squeeze, but we could have made it. However, I'm in a field where school loans are often paid back by the government if I work in an underserved setting...and I don't have to go far from home to find that. My sons advised me to take the loans in case they are ultimately paid back by the government. So, I did.

What did I do with my student loan money? I work part-time as an RN, so I diverted 100% of my salary into 401K and used the school loan money for expenses. Bottom line? When I graduate I will owe approx. $50k in school loans. I now have $50k in my 401K that I would not have had if I had needed to use my salary for living and school expenses. And the best part will be if I never have to pay the school loans back. And, if I do? That's OK...it still allowed me to put $$ into the market at a time when the market was very depressed. Before I went back to school, we were funding retirement, but I would never have been able to continue that during school because of my part-time hours.

So...pay your credit card with this money. It's yours to use as needed. Use the system.

[Anonymous]

tl9606

I do not think that you should use the money for credit card debt.   Your scores are already in high acheiver status.  You mentioned that you have 9800 in CC debt  but did not mentioned your utilization.   if you are not very higly utilized ie less than 9%  then ther is no added advantage to paying this off the boos t to your score will likely be minimal.  zero credit card debt is a perfect number however is you pay it off and then continue to  use the card and accumulate more debt this will be futile and a waste of your money.

if you plan on gettng a house within the next 6-12 months and by your standard budget you will not be able to pay off the cards by then, it might be a good then to pay it off and stop using the cards period.  Also sending the money back to your student loan and pay off your CC  from your current budget is another option.  I am not sure if you have emergency funds , but you could use it for that purpose...  but at a cost i am not sure what your interest rate on the loan is ( big factor)  but imagine if it is over 10% it might not be  worth it.

Remember no loan is free... it cost something.   moving debt around is not good money management either, that cost soemthing. (this would be like sweeping dust form your kitchen into the closet where it is less unsightly) .    Student loan are installment true... and it will look better on your report true.  but the long term cost of the debt should no be overlooked.   Remember your credit score is important and more so when you are getting ready to borrow money outside of that well...I  beg to defer.  Never forget the goal of borowwing other people money is to make sure you gt it as cheap as possible and do not take it if you do not need it and  debtt free is the only way to be in the end.

[Anonymous]

I have not added on to my credit card debt in years..i have only brought it down from 15,000 to its current amount.  My wife has zero credit card debt and is very much against using them and credit scores hovering around 800 so we will not be using our credit cards at all.  I have a AMEX card that i use for monthly bills and expenses and do not carry a balance on.

Do you still think this is a bad idea to use the loan check for my credit cards?

[Anonymous]

my utilization is at 19% which is pretty high from what i have read.  We would like to purchase a house within the next 6-12 months and no I cannnot pay off the card by then with my current budget.

"but at a cost i am not sure what your interest rate on the loan is ( big factor)  but imagine if it is over 10% it might not be  worth it." - are you talking about the student loan? the rate on the student loan is 6.8% this is lower than the credit card rate of 9.24% after my special 1.9% rate is over in january.

[Anonymous]

T,

It totally makes sense. Whats the rate of your new student loan? I would definately take a look to see what your interest may go up to after your intro rate expires. How much did you get back from your school? I think it would make sense to pay off the CC, which could possibly go up in the rate. Anyways this is just my personal opinion and besides if ur student loan is fixed and you pay on it on time - it doesnt go against you during an app for credit.