Using forbearance status to pay off credit cards...

[BrokeStudent2010]

Has anyone used forbearance as a means of holding off paying student loans so you could get ahead on paying down credit card debt?

I am considering this. I have about $6,000 in credit card debt that I want to eliminate, but with my student loans coming out of grace period soon I doubt I will be able to reach the goal of paying off my credit card debt as soon as I want to.

Just wondering if anyone has had experience with this in the past.

Thanks.

[Tazman81]

I think that you would need a reason to get a forebearance. i.e. financial hardship.

Your situation is a little different than mine, but I will tell you the cliffs notes version of mine.  I was bad when I was younger and didn't know any better.  I charged up credit cards, and did my own thing.  I had a great FICO score.  Then of course I kept getting all these offers for private student loans because of my good credit.  I thought wow, I could pay off my credit cards with this student loan money.  Well, ended up, I did pay off my credit cards with some of that money (and some of it went toward school), but I found my credit cards creaping back up.  Well needless to say, that irresponsibility lead to my own personal stockmarket crash aka chapter 7.  So, my debts got discharged, but a lot of it is still with me since it was considered a "student loan".

But like, I said, your situation is a bit different then mine.  I do think if you are able to not charge on your credit cards, then it would be financially responsible to see if you can get your student loan payments deferred in order to knock out your credit cards.  But I would only try that if your credit cards have a higher interest rate.  I would also make very sure that you actually get the forebearance.  I've seen a lot of horror stories on these forums where people thought they were in forebearance only to get lates put on their credit report because they really were not.

[BrokeStudent2010]

Thanks for your response. You make some valid points, especially about making sure that the forbearance does not negatively affect my credit report.

I do already have a financial hardship. My student loans are much higher than my income and I was planning on applying for the Income Based Repayment program to help with that, but then this idea crossed my mind.

All of my credit card interest rates are higher than my student loan interest rates right now.  Another part of my consideration has been that student loans are considered "good debt" and credit cards are "bad debt". Most of my student loans are government backed, and I beleive the government is more flexible about attaching forbearance than private lenders/servicers. From what I have heard and read there really is little way to get out of paying for student loans, so that may factor into why the lenders don't put up too much of a fuss when a person requests forbearance. Please correct me if I am wrong on that point.

Well, again thanks, I will factor all of this in as I decide if I should ask for a forbearance.

[Tazman81]

+1 ---  I agree with you.  I say go for it. 

[BrokeStudent2010]

Hi, I just wanted to update this, since I am the OP. So, I actually did not have to go into forbearance status on my accounts because I am doing the Income Based Repayment plan for my student loans. The plan bases future payments off of your past income. I did not earn income last year as a student, so my payments are $0, but I can still pay down interest as I see fit. This has been great for me because I was able to put more money towards my credit card debt.

So, now my success story - I have paid off about 70% of my outstanding credit card debt by using my tax refund to make large lump sum payments on my cards and by applying money I would be using for student loan payments to my cards. I feel soooo much better knowing that I don't have all these different payments to juggle now. I'm on the right path to financial freedom and I just want to thank the myFICO community for your support a few months back.