I have the cash to pay tuition available, but I'm still going to take Federal loans for two reasons.
1)I have the cash as a cushion in case my car breaks down, I break a leg, or my roof needs to be replaced.
2)you can take deferment while in school, but also if you have hardship later on.
Cons:
1)1% loan initiaion fee is just lost $$$.
2)I probably won't qualify for the tax deduction on loan interest.
As far as the credit card idea, Citibank will let you write a balance transfer check directly to the school, but keep in mind most of these offers come with a 3% balance transfer fee, the interest on which will compound while you're in school. the biggest problem, as I think Momo mentioned is that you have to make payments throughout school. Most credit card issuers just raised their monthly minimum payments from 2% to 4% of the balance, so you would end up paying off most of the balance before you graduate (projected payoff if you don't continue to make new charges is 48 months (once interest is factored in).
One final point in favor of federal loans. With interest rates under 6%, you're paying only slightly more than inflation on the balance every year. By drawing out the loan length toward 10 years, you can put your available cash to much better use by buying a house or putting it into your Roth or other investment account (caveat: drinking extra beer is not an investment).
16 Replies
2122 Views