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

Regular Contributor

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

tl9606, I preference my response by saying that you are the only one that can ultimately decide what to do based on your situation.  Nonetheless, being a recent graduate myself, I would advise you to not use the student loan refund to pay off your credit card debt.  First, a student loan is an installment loan that can not be dismissed in bankruptcy.  Not saying that you would ever not pay your bills.  However, most people file bankruptcy because of medical emergencies.  I personally would apply the refund check to my student loans.   Second, credit card debt is revolving and can be dismissed in a bankruptcy proceeding.  And third, as was previously mentioned, you definitely shouldn't consider it if you don't change your habit that caused the debt in the first place. 

 

Just my two cents.  Good luck and I wish you the best!

Message 11 of 14
Established Member

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

The interest rate for the student loan is 6.8% and is fixed...I got $9500 in the student loan check, so i would be able to completely wipe out my credit card debt this month
Message 12 of 14
Senior Contributor

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


tl9606 wrote:
The interest rate for the student loan is 6.8% and is fixed...I got $9500 in the student loan check, so i would be able to completely wipe out my credit card debt this month

 

Is the interest deferred until after you graduate? (When does it start accruing?) When do you have to start paying?
Message 13 of 14
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Regular Contributor

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

tl9606   I agree with rome0047  that the nature of the debt  is also important .  the credit card can be obliterate in BK and student loans  cannot.   My opinion still stands considering the fact your wife fico is abouve 800.  paying off the debt  with  have minimal impact on the rate at  which you borrow ( again the only reason for FICO).    But the peace of mind and satisfction of  not having CC debt is priceless I understand that.

 

If you have money enough for your downpayment 20% ideally to avoid the PMI then you will have three  CCC's  credit  ie high FICO = low interest,   and Capital   being your main here.

 

if you do NOT  have the  20% downpayment to avoid PMI , the money can be saved and use for house downpayment ( investment).  this will be more valuable in the long run.  If however your income  to debt ratio is above the ideal 30%,   in calculating your  mortgage and the minimal CC payment is  going to be too close to the ideal limit  of income to expense then Pay of the CC.   paying them of with the student loan is not a good idea but  for my brief explanation about the house it might be worth  it.

 

so do the math again,  the temptation is always great to move money around but the cost of doing so is always the  bottom line.

 

Message 14 of 14