Used CC Balance Transfer to Pay Down Student Loan
I went ahead and used the balance transfer from my credit card to pay down my Grad Plus student loan. The amount of the transfer was $4900 plus a $75 balance transfer fee. Since my interest rate will be over four points lower on the credit card I should easily make up the balance transfer fee. If my math is correct after seven months I’ll come out ahead. The credit card rate is for life and I have other higher interest debt so I’ll be paying only the minimum or slightly above the minimum payment on the card balance. Once I graduate and my income is more certain I’m going to look into paying down more of my student debt in this manner.
One of my goals this year was not to incur any debt other than student loan debt. Since this is just student loan debt transferred to my credit card I feel it is within my goal.
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3 Responses to “Used CC Balance Transfer to Pay Down Student Loan”
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Enjoy your blog.
As long as you’ve looked at the tax/FICO implications, sounds like a great move. We are doing a Bal.Txfr to lower and lock in interest on part of a HELOC. Doesn’t bother me to carry a balance on a CC as long as it makes sense!
If this was a student loan, did you factor in the tax deductibility of the interest you were paying before you did this?
personally, student loan money is the cheapest money around and I would never move it to cc for any reason.
Additionally, if you somehow end up working in a particular profession (e.g. teaching) many school districts will pay off your student loan. They won’t pay off your credit card.
I think this was a bad move but I don’t know your circumstances.
I am in the process of doing the same CC balance transfer to pay off student debt. GradPlus loans carry 8.5% fixed interest, so I think you made a good decision. TheDude is right that interest deductibility should be taken into account, however there are many other factors that have to be considered. I found this site very helpful.
http://www.irs.gov/publications/p970/ch04.html#d0e4234
You can only deduct a maximum of $2500, and if your individual gross income is more than $70,000 a year, then you can’t use this deduction at all. I have around 200k in student debt, and I am within the salary requirements. I did the math, and if you have more than 50k in loans, you will probably reach the $2500 threshold quickly. There is no reason we should be forced to pay 8.5% fixed on government loans, while interest rates are heading towards all-time lows.