Jan
7
Is it better to have thousands dollars of debt in student loans or on a credit card?
Filed Under Personal Finance
NELA asked:
I accepted a greater amount of a loan that I actually needed for school to pay off my credit card balance which was near the limit. Was that a smart thing to do? or not?
It was the Stafford loan if that makes a difference.
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I accepted a greater amount of a loan that I actually needed for school to pay off my credit card balance which was near the limit. Was that a smart thing to do? or not?
It was the Stafford loan if that makes a difference.
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6 Responses to “Is it better to have thousands dollars of debt in student loans or on a credit card?”
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It’s much better to have educational debt than credit cards!
Trust me! I know…
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depends on what interest rate you got for your loan and what was the interest rate on the credit card. Even is stafford was less, unless you make more that the minimum payment on the loans, you may still pay more on interest in the long run.
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if you destroyed the credit card it was probably smart. If
you are just going to run up more debt - it could lead to disaster.
Credit cards usually have an outrageous interest rate.
Most of the problem the country is having now is due to
excessive debt by individuals and our governments.
On your blackboard, write 5000 times, “debt is not good”.
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Debt is Debt. It is better to have NO debt. That said, in a worst case scenario, credit cards can be discharged in bankruptcy. Stafford loans can’t.
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In some ways yes- you paid off a high interest credit card debt with a lower interest rate loan.
The downside is on your tax filing. You can itemize and deduct your student loan interest on our taxes (which makes sense if your itemized $$ amt is more than the standardized limit). However, the only catch (you may need to check this) is that you should have used your entire student loan amt towards your tuituion, boks etc.
consult with a tax advisor…
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Yes. It was a smart thing to do. The rates are lower on your consolidated student loan and you will pay it off methodically over time.
However, If you go charge up your credit card again, then you will undo all the benefits and make things worse. The really smart thing to do is as follows: Now that you don’t have any credit card payments, you could start saving. First maximize your contribution to your company sponsored 401 K plan. That will be a good start. If you still have surplus cash each month, then you could consider opening a Roth IRA account.
The reason I am saying this is that, young people hear so much about credit cards, but very little about saving and investing for the long term. Debt as such is not bad if it is used wisely and managed carefully.