Author Topic: Putting student loan debts on low-interest credit card  (Read 3485 times)

thor800

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Putting student loan debts on low-interest credit card
« on: March 28, 2012, 02:09:14 PM »
I have about $22K in student loan debt from grad school at about 6.8% interest.

Was just wondering if anyone has used a low-interest credit card to save on payments over the lifetime ?

Any ideas ?

poorplayer

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Re: Putting student loan debts on low-interest credit card
« Reply #1 on: March 28, 2012, 07:46:37 PM »
I have done that for my kids, but the real key to doing something like this is to make sure you can pay off as much of the amount as you possibly can as fast as you can, regardless of interest rate. Always pay more than the minimum amount you owe, and dedicate as much cash as possible towards that goal. Very few credit cards have a FIXED rate lower that 6.8%. A lot of those cards, the low interest rate is an introductory offer that can climb to rates that the Mafia loan shark on the corner back in my day would have been ashamed to charge. WHen we have done it, we've placed the debt on a 0% interest card and made damn sure we paid off the entire amount on that card before the 0% rate expired. If you can't accomplish that, better to pay larger amounts on the loan as it is. Any amount you can pay over the minimum amount will effectively "lower your rate" because you'll pay less interest over the life of the loan.

Mirwen

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Re: Putting student loan debts on low-interest credit card
« Reply #2 on: March 29, 2012, 12:14:40 PM »
There are two sides to this.  One, if you trade student loan debt for credit card debt, cc debt is better.  Student Loans will follow you for life.  You can just stop paying a credit card and not much will happen aside from phone calls and a lower credit score (most of the time).  Student Loans are not so easy to shake off. 

However, as Mustachians, we generally are able to pay our loans.  So, the details of the cc are very important.  Generally they can change the rate at any time.  So if you are talking about paying it off in a year or two, the cc might be good.  However, long term they could make significant changes.  Read those little papers you get in the mail.

AJ

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Re: Putting student loan debts on low-interest credit card
« Reply #3 on: April 05, 2012, 05:29:21 PM »
I did this with my student loans. I got a balance transfer offer for 2.99% for the life of the transfer, got approved for a $30k limit, and transferred over everything I could. The fee was 3%, but it had a $100 cap, so that was all I paid. My student loan rate was 6.8% as well, so even losing the tax deduction I still came out ahead, plus credit cards don't follow you for life like student loans. The risk I took was that, if I had run into financial hardship, I no longer had the ability to defer the payments.

It worked well for me, and I have since paid it off. I was fed up with dealing with Sallie Mae's customer service, and was thrilled to be able to drop them.