29 Jul Using Your Student Loans To Pay Off Debts
So you’re getting a higher education as a means to start or further your career, but the debts you’ve amassed over the past few years are vying for your attention. You may have thought about using your student loans to pay down credit cards or other debts… but is it really worth it?
When you sign a student loan agreement, you are telling your lender that you will use the loan to pay for expenses directly related to your education. This can incude living expenses, and personal debts are arguably a part of these expenses. Your lender would likely not be pleased to learn that you used your student loans to make credit card payments, but if you incurred credit card debt as a result of being in school – say, you had to reduce your work hours to attend classes – it would be possible to argue that your debts were related to your education.
The trouble begins when you have completed your education and it’s time to start making payments on your student loans. It’s possible that you have saved credit card finance charges by using your student loans to pay off your credit cards, but the entire time you were in school, your loans have been quietly accruing interest. By the time you have to begin making student loan payments, you will have incurred more in interest charges than if you had simply paid off your debts through part time or full time income.
If you can possibly avoid it, it’s a good idea not to use student loans to pay off debt. In the long run, you’ll end up paying quite a bit more for these debts – you could have paid them off in a year or two, but by rolling them into your student loans, you’ll be paying interest on them for a decade or more.
Jay S. Fleischman is a bankruptcy lawyer with offices in New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.
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