I currently have a student loan with Sallie Mae with an interest rate of 6.75%. My most recent payment just went through, and until my next payment, I will be paying $1.92 a day for the privilege of carrying this loan. With my payments, it seems to decrease ~ $0.07-$0.10 a day each month.
Let me start off by saying that words cannot express how much I hate Sallie Mae. Their customer service is atrocious... there have been multiple mistakes made in my account. I've called and received different answers from different people, been talked in circles, been offered various services by pushy sales people that I've repeatedly turned down... anyway... /rant done.
There are similar posts on this site and others that have given me ideas, and I'm sorry if this seems like a redundant post, but I'm hoping that you can tell me that "yes, this is a good idea for you, good luck!" or "no, terrible, suck it up and stick with Sallie Mae."
The idea is transfer the remaining balance of my loan to a 0% interest credit card (for several months). There are various fees involved, of course, and taking that into consideration, I'm wondering if it's worth it...
I would get a 0% interest free credit card for 15 months. Currently, I put a 'minimum' of $500 towards my student loans, so putting aside $500 for a credit card would not be a challenge. Typically I pay more a month, but $500 is definitely doable so I'll stick with that.
15*500 = $7500... so at most, I'd like to have a $7500 balance on this new card.
Most of the cards I'm looking at have a 3% transfer balance, so...
7500/1.03 = 7281.55
Sallie Mae has yet to answer me what the credit card convenience fee would be, but I've come across third party websites saying it's either 2.5% or 2.75%. So taking that into consideration...
7281.55/1.025 = 7103.95
7281.55/1.0275 = 7086.67
So I'd have to wait for my balance to drop to either number above to do this. In either case, I'd be paying ~$400 to not pay interest anymore (and to get rid of Sallie Mae!!!)
Some final thoughts and questions...
- Does my math above make sense? Or did I miss something?
- Yes, student loan paid interest is tax deductible. To be perfectly honest, I'd rather get rid of Sallie Mae than have it as a tax deduction, so this is of low importance to me.
- Credit card interest would likely jump up to anywhere between 14%-23%, clearly much higher than the 6.75% I'm paying now. I am not planning on carrying a balance on this card - ever. That's why $500 a month ($7500 total balance) was chosen. Each paycheck I automatically set aside $250 to put towards student loans, and any extra money I have from staying under budget, side gigs, etc., goes in additionally.
- If it matters, my current balance on SL is ~$10.3k. If I follow through with this plan, it would be probably in March/April, after my tax return (which will be put towards the loan!). Last year my total tax return was $2.3k (and I haven't changed my numbers yet... I know, I know, facepunches all around).
- I would make this student loan 'purchase' on my current Visa card, but I'd have to ask for a credit card increase (it's a card I don't use regularly. Current limit is $2.4k... it was my college credit card with a measly $900 limit that they increased without me asking once I got a job and income). Would it make more sense to find a 0% interest free for purchases card instead?
- None of this will be eligible for credit card points/cash back/ rewards. I'm okay with this.
- This MUST be paid off in 15 months, I'd be shooting for 12!
- As a newbie to financial life, I am curious what this would do to my credit score. I'm currently at about ~750 (according to creditkarma) with a short credit history being the most detrimental. I've never missed or made a late payment on anything. I'm not planning on purchasing a home or any major ticket item in the next 2-3 years. Could this still negatively impact me?
Ok, monster post is done. Thoughts? Critiques? Is this a viable option or am I looking for an easy way out?