With Federal student loan interest rates doubling to 6.8% and private loans averaging between 8% and 12%, some graduates are contemplating paying off their student loan debt with credit cards. This can look like a good option with the amount of credit cards offering rewards points, low to no interest rates for a year, etc. And unlike student loan debt, credit card debt can be discharged in bankruptcy court. Sounds tempting, right? Well, let me tell you why this is a bad idea.
• Shifting student loan debt to a credit card can be costly. These transfers are accompanied by fees and higher interest rates. Once the promotional interest rates expire, the average credit card interest rate can run you close to 15% every month.
• If you pay off your student loans with credit cards, the credit card debt would be non-dischargeable in bankruptcy. It would be considered fraud if you pay off your student loan debt with credit cards with the intention to file for bankruptcy.
Remember, there are other alternatives to paying down your student loan debt. If you have federal student loans, explore an income-based repayment plan or graduated repayment plan before resorting to using credit cards to pay off your student loans.
Click here to read more on the various alternatives to pay off your student loan debt.
If you are in a financial crisis and are considering filing bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.