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Converting Credit Card/Remaining Car Loan Debt to Student Loans
Hamurabi
MiamiRegistered User regular
MiamiRegistered User regular
Is it a smart move? The numbers atm are:
If I turned all of this debt into student loans, I'd be up to ~$38k in student loans. Assuming I land a decent middle-class wage job (let's put the number at $50k/yr), does this seem reasonable? My logic here is that I need to pay off the consumer debt anyway, and so I may as well do it at student loan rates, because afaik even unsub rates will be better than consumer rates. Am I right in thinking that converting it is the way to go?
- $9,000 on one credit card
- $2,000 on a store charge card
- $7100 payoff option on the remaining payments for my car loan
If I turned all of this debt into student loans, I'd be up to ~$38k in student loans. Assuming I land a decent middle-class wage job (let's put the number at $50k/yr), does this seem reasonable? My logic here is that I need to pay off the consumer debt anyway, and so I may as well do it at student loan rates, because afaik even unsub rates will be better than consumer rates. Am I right in thinking that converting it is the way to go?
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Oh, sorry. Just scanned the first page and made the thread, because I am a jerk.
A Master in Theological Studies that I hope to turn into a career in foreign policy in the private sector, or pursuing work for the federal government as a fallback. I'll also be applying to a dual-degree program with the School of Government, which ought to increase my quantitative/"practical" skillset. I haven't completely ruled out pursuing a PhD.
Basically, the bare minimum I will walk out with is a degree with a heavy emphasis on Middle East politics and Islam as well as lots of coursework in general political science. I understand that that's not amazingly marketable per se, but I am also relying pretty heavily on the career services offices at both the Divinity School as well as the School of Government (both of which I hear are good) for job search/networking support.
School itself isn't gonna cost me anything save for living expenses.
I don't want to scare you but since you haven't started grad school yet I recommend seeking out the career center resources right now before you even pick your classes. That stuff is more effective if you can work on getting the right experiences from the beginning rather than trying to get the connections and put a spin on your résumé near the end of your degree. (I'm sorry for stating the obvious if you're already doing this, but I've seen too many masters students dig themselves in a hole because they think they have one or two semesters to spend just exploring their interests and not thinking about jobs yet. And I'm in a field where employment prospects are considered relatively good...)
I think you'd be better off just trying to find a lower interest credit card or loan and transferring you higher interest balances to that if the interest is outrageous now.
Secondly, if the loan issuer ends up not caring about using the "student loan" for whatever you wish, then my next thought is to examine the terms of the loan. What you seem to be hoping for is a debt with the lowest fixed rate. If the rate is variable, keep in mind that rates are at record lows right now, and will go up a significant amount in the not-to-distant-future.
So if everything goes well, you would save money by taking your proposed course of action. But if anything goes wrong, you are in a much worse position.
Exactly. Why would you want to push the debt from dischargeable to non-dischargeable?
Just start plugging away at the cards. 9k is a lot to have on a card when you're in school.
Thirded. You're already in a decent amount of non-school debt for only just starting grad school. You have no job yet and you're in a field where you'll either be teaching, working at a think tank, or not using your degree for your job which will probably leave you with less income than you're planning to start with, at least in the beginning. You'll have more wiggle room with credit card and car loan repayment than with student loans. Keep it that way.
There is a very good chance that you will have a masters degree and make 30-40k a year. There is also a chance you'll be doing 15-20k a year.
A bankruptcy if you need it will allow you to pay 20 cents on the dollar for all of your loans except your student loans. Also you may pay off all your cards and your car with your student loans, then rack up the bill on them again and have another 10k in CC and 38k in student loans.
I could see advantages in paying off your car, but only if you keep your car for an extended period of time.
I guess I should mention that I don't actually have the car that I'm making payments on anymore. It was stolen a year ago and I had no insurance at the time (I make excellent life decisions, don't I?). I don't know if that makes any difference to the calculus, but I figure more information about my situation can't hurt.
As for the legality of using student loans for non tuition/school related expenses, you could always use the loan to live on and put all income towards paying down the debt. Pretty sure that's legit. I am super surprised you can get $20,000ish in subsidized loans though. From my recollection it was only the stafford federal loan that was subsidized and the cap for that was $8500.
Unsubsidized.
While yes, it's better to say "I'm going to pay things off", it's nice to know that if you get run over by an uninsured hobo who stole a car, you can discharge the debt with your medical expenses. It's seriously a boneheaded move to transfer it to a non-dischargeable arena without a large principal or interest rate reduction. Notwithstanding that OP is already noted for not being terribly responsible with money given the information he has provided.
The people that incur a debt that they don't intend to pay off will structure it so that the an LLC or other corporate entity is liable, not themselves.
Everybody expects to be able to pay off their debts. It's basic human nature to expect a positive outcome, which is why people systemically ignore risk. Everyone in this article expected to pay off their loans, yet some will not. http://www.nytimes.com/2012/05/13/business/student-loans-weighing-down-a-generation-with-heavy-debt.html?pagewanted=all&_r=0
If these people had racked up credit card bills this large, they would be scot free right now.
Obviously it's not without risk, but that doesn't make it outright a bad idea. It will absolutely depend on the interest rates, but I would be shocked if the credit card rates were less than 20% interest. That means the OP could be getting north of a 4 fold decrease in interest by switching that debt to student loans. If it already looks like there is no chance of ever paying it all off, then sure, don't shoot yourself in the foot now. But if things still look at all manageable, then there is just no way that keeping the credit card debt makes sense.
Also, bankruptcy is not getting off free and clear. I'm not a bankruptcy lawyer, but you have to be in pretty dire straights to even be eligible for bankruptcy. While it is a good last resort if everything goes belly up, if the OP maintains a reasonable income, that isn't high enough to pay down the debt, it really doesn't help him.
In my personal opinion I would look at your interest rates and consider taking out more student loans so that you can pay down any ridiculously high interest rate debts. Like 20%+ rates. For things like the auto loan where you are likely only at 4-8% or something, I would leave it. You've already got 20K in student loans, I don't think another 9 is really going to sink you, and I do think eliminating any very high interest rate loans will help out a lot in repaying them.
As always, the best advice is to contact a professional. In this case, there's probably someone at your school that you can talk to about your options.
I think it's time we had a conversation about why Hamurabi has over $7k left on a car loan for a car he no longer possesses. :P
I would say that it's maybe not a terrible idea IF you committed yourself to taking what you're paying into that debt now and paying it into the newly acquired student loan debt instead. If you're going to take it as a pass to not pay anything until after you graduate then I don't think that with your track record it's a good plan. I think you'd be better off taking the responsibility for it now and paying it down as much as you can, as soon as you can.
I am a bankruptcy lawyer. You don't have to be in "dire" straits to file chapter 7 or 13 and get a discharge, it just does major damage to your credit and should be an option of last resort.
What you're advocating is for OP to assume guaranteed income stream for the next 4-5 years. This seems extraordinarily unwise to me.
Assuming OP even finds a job, the weak economy or a personal or family misfortune could end any employment he does find in an instant.
It doesn't matter if things "look manageable," because the whole point is that if things turn out bad then he is exponentially screwed. The upside is that you will knock down interest payments on the credit card by 10%. The potential downside risk is that he cant find a job for 2-4 years and never crawls out from under his student loan debt.
If things do go south he could negotiate a settlement amt with the credit card companies, but student loan lenders at best go
to 85% of principal.