Student Loans and Credit Cards

[religiousphilosopher]

If your grad school is offering you federal loans to cover living expenses, can these be legitimately used to pay off credit card debt?

If you consider that working more hours to pay off a credit card can hinder how well you do in your classes, then it makes sense that one should be able to use a student loan for this purpose, since it would be helping your education.

Have you heard of anyone doing this? Is it legal? Advisable?

[rising_star]

My understanding has always been that the loans are to be used for current living expenses. But I don't think they can stop you once you get the money... The school will take out whatever you owe it before disbursing the funds to you, FYI.

[luvalicious]

Unless you're paying off debt that you accumulated for school for the term the money is awarded - for example, you put your books on your credit card because the check wasn't there yet, or you put your rent on your credit card and then use the loan to pay it off - then technically you're misusing the money. I wouldn't do it, especially because what you'll actually get out of the federal loans is probably going to be barely enough to live off of as it is... and it may catch up with you later.

[Minnesotan]

On the contrary, the interest rate on your loans is bound to be much lower (or subsidized by the gov), so it makes good financial sense to pay off credit card debt with student loan monies.* Then, if you need the extra funds later, you can charge your expenses -- all that interest you saved in the interim will be quite beneficial on a student's budget.

Basically, by keeping your credit cards maxed out, all you're doing is handing money over to the bank for no reason. Nobody is going to investigate where the loan money went once they hand you the check, and it is easily justifiable when you consider the same amount of money will be going to the same places; it's just that you won't be paying interest on your debts in the meantime.

I know I paid off my cards right away when I got my loans, then charged my books and school expenses over the course of the year. Don't go into debt until you need to, and don't stay in debt if you don't have to.

*Remarks in this post are provided for entertainment purposes only. The author assumes no liability for the actions of other forum users. =)

[religiousphilosopher]

*Remarks in this post are provided for entertainment purposes only. The author assumes no liability for the actions of other forum users. =)

Does this indicate that you did not actually pay off credit cards with your student loan...?

[Minnesotan]

No. It means I am not liable for people doing what I may or may not have done. =)

[frankdux]

you can do what ever you want with the money the school gives you. i paid off bills, credit cards, and even took a vacation off of stipends during my previous masters. never thought twice about it. its money for you to live off of. how you choose to 'live' is up to you.