Should You Use Extra Student Loan Money to Pay Off Credit Cards?

A Mismatch: Student Loans and Credit Cards

A student loan is a means for borrowers or students to go through college to earn a college certificate or diploma and, optimistically, get the “better tomorrow” we’ve always dreamed of. But even then, this notion is too forward-looking and positive considering the advent of higher inflation, interest rates and costs of living. Saving up for a better tomorrow or, at least, an easy retirement has turned out to be a pipe dream for some and, almost, an impossibility for others who can’t even pay for their loans.

Investing in a good education has grown pretty costly over the years and this urged most, if not, all of us to get a student loan. Student loans are commonplace and even normal for most of us because we don’t have the financial means anymore to get the good education we’ve always wanted. Yes, student loans are becoming a normal trend.

A student loan may cover costs, fees and expenses in schools or institutions. This commonly works for government or federal student aid. In federal student aid, a low-income student may avail of a good education in a public or private school or institution that participates in federal aid or that caters to low-income students too.  The uses of student loans have expanded from covering tuition fees to basic needs to communication, transport, food, accommodations and personal items. Some would even use student loans to pay off credit.

Student loans and credit cards practically don’t go together especially if you want to use your student loan to your advantage.

A Matter of Interest: Nothing Beats Cash

Paying off credit cards with student loans is a matter of interest. By principle, paying off debt with debt is bad but it works for some people because it satisfies the immediate need to buy. If the student loan has a low-enough interest as compared to the credit card debt, it would still be justifiable to pay off the credit card debt with the student loan. It is better to prioritize the loan or credit with the higher interest rate given that, interest rate accrues over time over and above its principal. As the cost of the credit piles up, it becomes harder and harder to pay for it.

Another good reason to make use of student loans for credit cards is during times of emergency. If you really need it and do not have the capability to buy it, you use your credit card.  But then again, it is a case of prioritizing needs. You must ask yourself first if you really need the item or just want it.

In general, using your student loan to pay for credit is not that bad but it delays you from completing payments of both. You will probably be delayed because of the costs that pile up because of interest. Always prioritize higher-interest credit first because the costs pile up even faster with these transactions. If you have a low-interest student loan and have a little extra to pay up for the credit card, it is still reasonable to use your student loan.

But in the end, nothing beats cash. Use cash to pay for all, if not, most of your transactions. It has the least repercussions as compared to using your student loan money or credit card. If you don’t have the cash, at least come up ways to make cash. You can get a job or ask money from your family. You can also cut on school and home living costs. Lastly, you can be as creative as establishing your small business. Yes, nothing beats cash.