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Author Topic: Risky business  (Read 1689 times)

Momo09

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Re: Risky business
« Reply #10 on: July 07, 2006, 02:04:20 AM »
While 3.9% for life sounds great, with banks and credit card companies merging and being bought out all the time, it just seems likely that the 3.9% may be subject to change. Also, if you go for some other type of loan later, having a student loan will be seen much more favorably than having insane credit card debt.

Really?

I thought the chance of getting a loan depends on your credit history, debt to income ratio and potential future earnings.  Having large student loan without the ability to pay is still bad.
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Monarch heels

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Re: Risky business
« Reply #11 on: July 07, 2006, 07:37:01 AM »
Do I remember correctly that you can get a tax deduction based on the amount of student loan interest you've paid?  And this deduction wouldn't apply to credit cards...

fauxsheesy

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Re: Risky business
« Reply #12 on: July 07, 2006, 08:12:56 AM »
Do I remember correctly that you can get a tax deduction based on the amount of student loan interest you've paid?  And this deduction wouldn't apply to credit cards...

You are correct on that.  Good point. 
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queencruella

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Re: Risky business
« Reply #13 on: July 07, 2006, 09:03:04 AM »
While 3.9% for life sounds great, with banks and credit card companies merging and being bought out all the time, it just seems likely that the 3.9% may be subject to change. Also, if you go for some other type of loan later, having a student loan will be seen much more favorably than having insane credit card debt.

Really?

I thought the chance of getting a loan depends on your credit history, debt to income ratio and potential future earnings.  Having large student loan without the ability to pay is still bad.

From what I understand, mortgages and student loans are the best types of loans to have. You have a set amount of debt that will continue to go away by a certain date as long as you make payments every month. With credit cards, if you have a lot of debt already and multiple credit card accounts open, you have the ability to max them all out and make the minimum payments indefinitely. Even opening up lots of credit card accounts will bring your credit score down a bit. 

cesco

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Re: Risky business
« Reply #14 on: July 07, 2006, 10:04:30 AM »
Really?

I thought the chance of getting a loan depends on your credit history, debt to income ratio and potential future earnings.  Having large student loan without the ability to pay is still bad.

You are correct, however assuming you can pay, installment debt is generally much better than revolving debt. 

OP - google installment debt and revolving debt (or cc debt).  There is a lot of info out there....
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Momo09

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Re: Risky business
« Reply #15 on: July 07, 2006, 10:57:23 PM »
Do I remember correctly that you can get a tax deduction based on the amount of student loan interest you've paid?  And this deduction wouldn't apply to credit cards...

You are correct on that.  Good point. 

Loan interest deduction is $2500 per year max. If you make over 100K as a married couple, deduction is decreased.  Once you make over 150K/yr as married couple, you can't deduct anything.
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UGAfootballfanatic

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Re: Risky business
« Reply #16 on: July 09, 2006, 09:59:28 AM »
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).