Paying student loans w/ cc?

[sparky88]

I would just like some general feedback here.

If I have a student loan upwards of, say, 50K, is it possible to pay it off with a credit card? All in one chunk?

I realize this is a terrible thought,...but I was reading an earlier post about how when someone declares bankruptcy- it pretty much gets rid of credit card debt- but not student loans. SO, if you knew you'd be declaring bankruptcy at some point in the near future- and you had a CC card with 0% APR for one year...is there anything stopping you from putting the total loan amount on your cc card, then declaring bankruptcy and getting the debt wiped out that way?

FYI: I am not about to declare bankruptcy, but my parents *might* have to. And if they have to go through the whole ordeal anyways...why not get rid of my loans by putting it on one of their cards?

I'm sure there's some sort of loop hole that keeps people from doing this- if so- let me know. So I can find a way around it. hehe (half kidding) Thanks!

[AshleyJordan]

in theory it sounds good, but i'm sure it would and raise red flags, that shortly before they lost all of their money and declared bankruptcy they *somehow* managed to pay off $50K, which was meant to be paid off over 30 yrs, in one fell swoop. in theory it might work, in practice i'm sure it won't.

[sparky88]

Yea, I mean I'm sure I'm not the first person to have the thought cross my mind- I'm sure there's some system in place to prevent these kind of things. The 50K loan is only a 7 year loan though, maybe even just putting a small amount like 15K would be nice and less noticeable.

[wordsmith]

I would be ANYTHING there are provisions against profiting from that loophole, but I don't really know for sure.

[AshleyJordan]

Wait, Sparky, are you in Canada, or do I have you confused w/ someone else? That might change things. . .

[spokes]

seems nice of you to basically want to screw whomever (the gov't) borrowed you the money to further your education........

as an aside bankruptcy is a real minefield and i am sure that whomever would be going through your parents records would notice a $15,000 charge to whomever was holding the student loan and ask some questions.

[sparky88]

Let's just say I did not mention a thing about bankruptcy, at all....just in general...can you pay off a 50K loan with a credit card? that's all I'm really wondering. I'm just daydreaming while at work.

[spokes]

i have had a brilliant idea - why not call and ask whomever is holding the loan this question - normally companies do not let you pay off loans with credit cards or pay off one cc with another cc.

however, even if you could why would you. even if you had a cc with a 50k limit, and 0% finaciang for one year - what would you do after the one year. if the debt was not paid off you would then be paying 20% or whatever interest rate on the unpaid balance - even if you got air miles on this transaction it still seems like a dumb idea.

[sparky88]

normally companies do not let you pay off loans with credit cards or pay off one cc with another cc.


This is all I was asking for, a general answer to my question. Thanks.

[dacrunkest]

Credit cards are always trying to entice new customers with low interest rates on balance transfers - which is effect borrowing from Peter to pay Paul. I don't know about a student loan to a credit card though. I will say this: for two months before I set up electronic debit for my student loan through my bank account, I paid my monthly bill by debit card through the website. If you could get a card with a $50,000 limit, I guess you could do it (the Federal Direct Loan service webpage has a payoff amount in case you wanted to pay off your loan in fell swoop)...

Your best bet would be to reconsolidate your debt into a lengthier payment plan for now, and then accelerate it a few years later when you start making more money and can pay more off per month.

[spokes]

This is all I was asking for, a general answer to my question. Thanks.

perhaps my general answer is wrong - i was just saying that you be better served to call the loanholder and sort this out with them.

i personally don't understand why questions along these lines get posted in an online fourm to be answered by people who are not familiar with all of the speficis when they could be easily answered by an "expert" with one easy phone call.

[PeakDream]

BTW, sparky, I'm pretty sure if you do that, you just committed fraud. Judges in bankruptcy cases might not let you slide for the 50K debt.

[vxmike]

BTW, sparky, I'm pretty sure if you do that, you just committed fraud. Judges in bankruptcy cases might not let you slide for the 50K debt.

Not to be an accomplice to fraud, but people do this sort of thing all the time. Even if sparkys loan company won't let him/her pay directly with a CC there is nothing that would prevent his or her parents (or the OP) from taking cash advances from a CC and/or buying stuff to resell on Ebay for cash and paying off the loan with cash. It can be done without making the fraud obvious and prosecutable.

Only snag is that BK is not the cakewalk it used to be due to recent new BK legislation.

[PeakDream]

Not to be an accomplice to fraud, but people do this sort of thing all the time. Even if sparkys loan company won't let him/her pay directly with a CC there is nothing that would prevent his or her parents (or the OP) from taking cash advances from a CC and/or buying stuff to resell on Ebay for cash and paying off the loan with cash. It can be done without making the fraud obvious and prosecutable.

Only snag is that BK is not the cakewalk it used to be due to recent new BK legislation.

What you just describe is not fraud, since you are paying off the loan. If your parents take out the loan, you all of sudden paid off your college loan and your parents promptly declared bankruptcy, then I don't think there is any problem proving that.

[winneythepooh7]

Wow, and to think I actually do the honest thing and pay off my $70K in student loans on a mediocre social work salary in an area where the cost of living is ridiculous:rolleyes: . Why didn't I think of this........

[redav]

It is far harder to get debts forgiven with bankruptcy now that the new laws have gone into effect. There is no guarantee that the debt would be forgiven. Then you'd still have to pay it back, probably under terms that are no better than the student loan started off as, AND you've destroyed your finances with the bankruptcy.

[sparky88]

There is some key information about this idea that I left out earlier because I just wanted some general feedback. And yes, I realize that people our age who post on this board may not have an answer- but you never know unless you ask- so that's why I asked.:)

To clarify- I am not walking into this situation- I just hypothetically wanted to know if it could be done- and if people have done it in the past.

I am talking about a loan that my father took out for my education. He took the loan out in his name. He pays a good chunk toward it each month because he wanted to pay it off before he retired- but since he lost his job last summer (forced early retirement) he cannot make the payments. I have been required to help out (which I have no problem doing). So I write him a check for X amount per month. I also have a 17K loan that I pay for each month in my name.

I have paid all of my students loans thus far, on time and until a few months ago I did it on a salary that was way less than a social workers salary.

What is comes down to is this: If my father does not get a new job by May my parents will 1.) lose their home 2.) be forced to declare bankruptcy.

In light of the fact that they *might* have to declare bankruptcy anyways (which of course, will severely damage their financial situation)....I just thought- hey why not get rid of the college debt in one fell swoop if it's possible.

The idea is not to declare bankruptcy just to get rid of the loan, the idea is to take full advantage of going bankrupt and erase as much debt as possible.
That is all. And really, the thought just crossed my mind the other day so I thought I'd get input. Again, I'm not seriously sitting here debating following through on this- just wondering if it were possible.

Also, I realize that my father has other options- yes- to lengthen the term of the loan in order to reduce monthly payments, to go into forebearance, or deferment. I understand all of that. Again, just *wondering* if anyone had ever been in a similar situation.

Also, I think that average, good citizens (including every single one of you) would go to great lengths to protect their families, if the situation presented itself.

Thanks for the insights provided. Have a nice afternoon.

[winneythepooh7]

My parents were generous enough to take out private loans for me, as well as pay for part of my undergrad. (This is in addition to my $70K I am paying back). If they couldn't pay anymore for MY schooling on the loan they took out for me, I would suck it up and deal. Afterall, it's the right thing to do, especially given all they've done to help me out over the years. I knew going into school, that it was going to take me years to pay it off.

[sparky88]

I am paying for the loans, whether my dad declares bankruptcy or not.

If they end up declaring bankruptcy, why not wrap as much debt in as possible.

[redav]

I am paying for the loans, whether my dad declares bankruptcy or not.

If they end up declaring bankruptcy, why not wrap as much debt in as possible.
-----
It is far harder to get debts forgiven with bankruptcy now that the new laws have gone into effect. There is no guarantee that the debt would be forgiven. Then you'd still have to pay it back, probably under terms that are no better than the student loan started off as

That's why it likely is unwise to attempt this maneuver.

[sparky88]

-----


That's why it likely is unwise to attempt this maneuver.

That is good feedback. There is much to learn and I agree that this is something that would need to be researched.
Thank you.

[awhitmer83]

Since I just filed bankruptcy in September under the new laws, I can shed some light on this subject. <cracks knuckles>

If your parents file, their income and expenses will be under intense scrutiny. Any large CC purchases in the past year or two (we're talking any more than $600 here, nowhere close to $50k) would raise eyebrows. The CC companies would definitely object to such a huge amount. It would be different if your parents paid off the loans with the CC, made payments on the CC for four or five years, THEN had to file. But if they knew that their financial situation was precarious when they used the CC, it would be considered fraudulent.

Aside from that, any large purchases (CC or not) in the year prior to bankruptcy have to be explained and justified. They would have to disclose where that $50k went, and if it was used to finance or refinance education, it cannot be discharged in bankruptcy. Even if they leave the loans as they are, the loan in your father's name will not be wiped out through bankruptcy because student loans are simply not dischargeable any more. You (not your parents) would have to prove that you have some kind of lifelong disability that prevents you from earning enough to pay back the loans, since they were taken out for your education.

Hope this helps. If you have any other bankruptcy related questions, feel free to PM me. Unfortunately, I'm a wealth of knowledge on this subject.

[sparky88]

Unfortunately, I'm a wealth of knowledge on this subject.

I knew someone out there had to have info about this stuff. Thanks for taking the time to reply. That really answered a lot of my questions. And, i'm sorry to hear about your situation- hopefully things will look up soon.:)

[wordsmith]

Aside from that, any large purchases (CC or not) in the year prior to bankruptcy have to be explained and justified. They would have to disclose where that $50k went, and if it was used to finance or refinance education, it cannot be discharged in bankruptcy.

This was exactly what I suspected was prob the case, though I didn't know for sure.

My dad always says that two things are certain, death and taxes, but really, it's death, taxes, and that you WILL repay your student loans.

[Dude]

So the way around this would be to put 50K on a credit card or several credit cards and pay off the student loans, wait over a year and then declare bankruptcy.

[PeakDream]

Or, take out giant loans and move to another country without extradition treaty with the US.

[jrwilheim]

I took a financial planning class last semester, and I think I remember something about how bankruptcy courts look askance at debts contracted too near the time of filing...I'll have to look this one up.

If your parents are able to qualify for a card with a $50,000 spending limit, they are almost certainly wealthy enough that, under the provisions of the new bankruptcy law, they will be forced to declare Chapter 13 rather than Chapter 7. Here's the basic difference:

In a Chapter 7 bankruptcy, the slate is essentially wiped clean. The debtor's assets (minus a few thar are protected) are sold, the proceeds are divided up among the creditors, and that's the end of it.

In Chapter 13, the debtor has to create a repayment plan to repay creditors over a 3-5 year period. The creditors get less than they were initially owed, but the debtor retains his or her assets. Additonally, in a Chapter 13 bankruptcy, ALL of the debtor's disposable income must be used to repay creditors for at least 3 years (unless all unsecured creditors can be paid off in less than that time).

If your parents ended up in a Chapter 13 bankruptcy, they would end up being forced to pay off your student loans. It would just make the bankruptcy more miserable for them. So fraud aside, I would say, DON'T EVEN THINK ABOUT IT.

[wordsmith]

Or, take out giant loans and move to another country without extradition treaty with the US.

If you're in a position where you're enough in the hole that bankruptcy is staring you in the face, how likely is it that you can be approved for even small loans, let alone giant ones?

[redav]

If you're in a position where you're enough in the hole that bankruptcy is staring you in the face, how likely is it that you can be approved for even small loans, let alone giant ones?
20/20 did a story on debt recently. One of the classic stories they had was a family that was in/near bankruptcy who had a bank turn over their account to a collection agency, but they kept getting pre-approved CC offers from that bank. I would not be surprised if such people could scrounge together 50k worth of loans/credit. (To me, this is one of the big problems in banking right now--they ought to be punished for such predatory practices.)

[winneythepooh7]

I have a big problem with credit card companies targeting people who are lower income. Yeah, they should just ingore the offers, but sometimes people can't. It's a cycle, and people with severe disabilities who I work with, get caught up in it. There's also a reason bodegas that sell scratch-offs and lottery tickets are in lower-income areas.

[NewMrs.]

I have a big problem with credit card companies targeting people who are lower income. Yeah, they should just ingore the offers, but sometimes people can't. It's a cycle, and people with severe disabilities who I work with, get caught up in it. There's also a reason bodegas that sell scratch-offs and lottery tickets are in lower-income areas.


The sad thing is, the credit card companies aren't the only ones who take advantage of lower income people. IMHO, the payday loan places take a much bigger advantage of people who really need money badly. Their annualized interest rates come to something like 300% - 500%.

At least with a credit card, if you really have an emergency but will be gettng paid in a week or so and were therefore able to pay the money back, you can put it on your credit card and pay it off before the due date to avoid finance charges. (I really hate doing this, but its an option that I have that isn't available with people who find it necessary to utilize payday lenders.)

[wordsmith]

Many businesses feed on desperation.

[AshleyJordan]

Many businesses feed on desperation.

I'm starting to wonder if the entire self-help industry doesn't do just that.