Using student loan money for other purposes...

[Amila]

Ok, lets say you get approved for $12,000 MORE than you need in student loans for grad school. Money which is yours if you want to take it, and you will have to begin repaying in 3 years at interest rates of 6.8 and 8.8%.

If you were in our position would you do this?

We have VERY unstable (though a lot of) income, a LOT of debt, and NO savings. We need $6000/month just for bills, not including food and gas. DH makes around $8000. BUT we are pretty much one injury/illness away from complete financial ruin (hes a contractor). If we got behind even just one month, we'd be screwed. We have NO savings. We do own our home. This is very stressful.

I would probably take that money and pay off 2 high interest debts (Macys with like a 20% rate and a personal loan with a 12% rate) and put the rest in a savings account as a one months worth of bills cushion.

In 3-4 years our cars will be paid off as well as a lot of other debt. Plus then i would be working.

Is this just a really bad idea?

[cristeen]

How much would that 12K affect your monthly bills? You're currently spending $6K/mo on bills - how much would that drop if you had that chunk of money to drop all at once?

And have you already budgeted for all your school supplies, books and software?

[Amila]

I already budgeted for books and stuff. It would drop our monthy bills by about $350.

[Selesai]

Originally Posted by Amila

Ok, lets say you get approved for $12,000 MORE than you need in student loans for grad school. Money which is yours if you want to take it, and you will have to begin repaying in 3 years at interest rates of 6.8 and 8.8%.

If you were in our position would you do this?

We have VERY unstable (though a lot of) income, a LOT of debt, and NO savings. We need $6000/month just for bills, not including food and gas. DH makes around $8000. BUT we are pretty much one injury/illness away from complete financial ruin (hes a contractor). If we got behind even just one month, we'd be screwed. We have NO savings. We do own our home. This is very stressful.

I would probably take that money and pay off 2 high interest debts (Macys with like a 20% rate and a personal loan with a 12% rate) and put the rest in a savings account as a one months worth of bills cushion.

In 3-4 years our cars will be paid off as well as a lot of other debt. Plus then i would be working.

Is this just a really bad idea?

I did this. I would advise against it, because 1. those interest rates are not good and 2. you will get really tired of paying this for 10-20-30 years.

eta: Ok, I read the rest of it : You would be using the money to pay debts that have high interest rates. I think that's not a bad thing to do with the money. But 1. don't let it make you feel "rich," it's borrowed money too and 2. address the real issues behind you having these debts.

I hope I don't sound rude, I'm just short on time!

[leavemealone]

I would be reluctant to take it to pay off debt, but I may take it and put it all into an emergency fund and not touch it unless necessary. You are going to end up paying more for the Macy's & personal loan debt in the long run by including it in the student loan and paying it off over 10+ years, you just wo'nt "see" it as much. Also, if something extreme were to happen (severe illness that racks up huge medical bills, etc) and you would need to declare bankruptcy, the student loan most likely cannot be included. I'm absolutely not advocating bankruptcy (though I could file it myself), but it is something to think about.

[Amila]

Thats a good point...I only owe like $900 on Macys, so I guess I could chip at that and pay it off in a year or so, even with the 20% rate. And the other loan I have is going to be paid in 2 years as well...

But to put it in an emergency fund- yes or no?

[kriket]

ok, you have 2 kids, live in PA (lowish COL right?) Your husband brings in $8k a month. Your house is paid off.

where is your money going!

I would see if there was something more permanent you could do to balance your finances before you borrow more money from yourself.

[Thystle]

Originally Posted by kriket

ok, you have 2 kids, live in PA (lowish COL right?) Your husband brings in $8k a month. Your house is paid off.

where is your money going!

I would see if there was something more permanent you could do to balance your finances before you borrow more money from yourself.

: :



Unless there is something really unusual we do not know about, I think you will just be adding to the problems down the road.


$6000 in bills without food or gas (and is your house really paid off?) is alot of "budget/spending" problems (unless ofcourse there is some unusual story to this?).

[Amila]

Oops, when I said own our home, I didn't mean we actually own it, lol. I wish! We do have a mortgage is what I meant. And a lot of student loans, credit card debt, business debt, 2 car payments, and we have to pay for our own health insurance as well as business insurance, life insurance, etc.

It adds up

[shayinme]

Nope, not at all. I did this several years ago, for 3 years of graduate school, I took out the max and used it to supplement our income. At that time I was assuming, I would graduate and find a great paying job, after all I would have a masters degree.

Well life happened, it got got messy. While in grad school, my mother died and I got pregnant, two things that delayed my graduation and while I did graduate in 06. I now owe a lot of money. I started grad school owing only 35 thousand on my undergrad loans, well now my debt is well over a $100K and I am working but I am not making the kind of money I thought I would.

If I could go back, I would have worked more in grad school and not taking out the extra money aside from tuition and books. It was foolish considering my dh was making more money than he is now and we had one less kid, basically I was using the loan refund money as supplemental income.

The thing is I am on a 30 year repayment plan and the interest rates were lower when I consolidated in 06 and my payments are still high. Unless you need that money for food and shelter while you are in school, I wouldn't do it.

At the end of the day, debt is debt and it may seem like a good deal but the thing is you have no idea what might happen and cause your plans to change.

Shay

[abomgardner417]

I did this and I would advise against it. In my case the amount was much smaller, but I used it to pay off a cc bill. Two months into the semester I found out I was pregnant w/ twins and was put on bedrest and couldn't finish the semester. I was one day - ONE. LOUSY. DAY. - too late to withdraw and get a refund. Four years later, here I am, still paying on this stupid student loan for a semester that I didn't even get halfway through. The credit card would have been paid off a long time ago.

My point is - you never know what's going to happen. I would pretend you don't have the money. Put it in a high yield savings or cd (if they even exist anymore!) and pretend it's not there. Then you'll at least make a little interest on it and it's there if you had an absolute emergency - and I'm talking a life-changing/threatening emergency.

Probably not what you want to hear, but it's just too easy to feel "safe" having that much money when in reality it's still more debt.

[AuntNi]

I wouldn't do it. Student loans are pretty much the worst kind of debt to have, IMO. It can't be discharged in bankruptcy, if something ruinous happened to you guys. It stays with you until you DIE - they can even garnish your social security check for it - think about that.

Don't swap your unsecured credit card debt for student loan debt that can follow you to the grave. In this economy, who knows what kind of job you'll get once you're out of school? (Speaking as someone with $30K in grad school loans who just lost a great-paying job, and can't even find a $30K/year job now.)

[Thystle]

Ok... do you guys have a solid budget and debt reduction plan in place?



It sounds like you have alot of debts and I would REALLY have a FIRM plan in place, cut up all those credit cards, get a tight budget in place and be willing to really pinch pennies BEFORE you take on even more debt with NO guarantee that you will get a good job after graduating, if any job at all.


There are many thousands of people who went back to school and "assumed" they would graduate and get better jobs quickly. No one wants to believe it wont work out for them. No one thinks it.


Look how many people have been wrong!

[Amila]

We don't really have a firm budget in place...we live day to day, as the money comes in...it sucks! We literally spend the money before it comes in, as is the nature of my DH's work. Ware in the early years of his business, and we took on way too much at one time. So we are in a bad spot. We pay our monthly bills, we eat well, we do fun stuff here and there. But we are living on the edge of the cliff, so to speak. It would ease my mind SO much to have a cushion- even just one months worth of bills- in case of an emergency. I feel like this is our only chance to do that. We recently refinanced for a better rate, but didn't have enough equity to get money back.

[shayinme]

Originally Posted by Amila

Oops, when I said own our home, I didn't mean we actually own it, lol. I wish! We do have a mortgage is what I meant. And a lot of student loans, credit card debt, business debt, 2 car payments, and we have to pay for our own health insurance as well as business insurance, life insurance, etc.

It adds up

So you are already paying on student loans? I really would not add to what I owe by taking out extra.

Originally Posted by AuntNi

I wouldn't do it. Student loans are pretty much the worst kind of debt to have, IMO. It can't be discharged in bankruptcy, if something ruinous happened to you guys. It stays with you until you DIE - they can even garnish your social security check for it - think about that.

Don't swap your unsecured credit card debt for student loan debt that can follow you to the grave. In this economy, who knows what kind of job you'll get once you're out of school? (Speaking as someone with $30K in grad school loans who just lost a great-paying job, and can't even find a $30K/year job now.)

Totally agree with this. Right now if it goes bad, at least BK is an option for the credit cards, but student loans are with you forever.

Originally Posted by Amila

We don't really have a firm budget in place...we live day to day, as the money comes in...it sucks! We literally spend the money before it comes in, as is the nature of my DH's work. Ware in the early years of his business, and we took on way too much at one time. So we are in a bad spot. We pay our monthly bills, we eat well, we do fun stuff here and there. But we are living on the edge of the cliff, so to speak. It would ease my mind SO much to have a cushion- even just one months worth of bills- in case of an emergency. I feel like this is our only chance to do that. We recently refinanced for a better rate, but didn't have enough equity to get money back.

Everything you are describing sounds like my financial life, 7 years ago my dh became self employed...totally up and down. Like you I saw the extra student loan money as providing a cushion, in the end it really didn't provide a cushion, instead it got spent.

Honestly I would look at reducing my bills and look for any possible way to possibly save money, look for second or extra jobs. Its been my own personal experience and like I said I have been there even down to having the self employed dh that taking out extra money (creating more debt) really is not the answer. It is hard to budget when your income fluctates but its not impossible. There are basic things you need and must have and then there is other stuff.

I realize these are probably not the answers you want to hear but I would give anything to go back in time and not have taken out as much money. Its a good thing I like to work because thanks to the debt I carry, not working is not an option.

Good luck whatever you decide!

Shay

[CarrieMF]

I wouldn't do it. $12000 in savings may sound nice, but you're paying for that savings account. you will NOT earn back what you rack up in interest.

Even though dh's income comes in bits you still need to have a budget. Make it a daily budget if you have to.

From what little you have posted there are things you can cut out.

[kriket]

Originally Posted by Thystle

There are many thousands of people who went back to school and "assumed" they would graduate and get better jobs quickly. No one wants to believe it wont work out for them. No one thinks it.

:

Originally Posted by Amila

We do have a mortgage is what I meant. And a lot of student loans, credit card debt, business debt, 2 car payments, and we have to pay for our own health insurance as well as business insurance, life insurance, etc

if i woke up one morning in your bed, I would move the business into a separate entity so the business pays the business's bills. then try to hammer out a serious debt reduction plan, just chiseling away at the bills. with that i would draft a budget that includes squirreling some $ into savings. i would consider getting rid of the car loans, if one of them is a business truck the business needs to assume the loan.

i bet you can knock your grocery budget down by a third, what do you spend now?

[happyhats]

While we have gotten extra school loans, and probably will again in the future, it is far from ideal. I also agree that you need to work out a better budgeting system before you add more loans to the mix, as it will only hinder and not help. Really, I know this from my own past mismanagements. Right now the hubs is going through school to work in the healthcare system, so hopefully we will have a stable financial future, but it's true that you cannot know. I wish I could take back getting loans just to spend, not only because it will have to be repayed back but because it really only enabled us to get into a pattern of reckless spending. In your case, you do not need the funds for day to day living expenses or for school expenses, so I would resist the temptation.

[Leta]

No, I would not do this. I would do as pps have suggested, and stick the money in a high yeild savings account (eTrade is good) and forget about it, barring some major and unforeseen expense. At least that way you have an emergency fund.

[Knittin' in the Shade]

nope, wouldn't do it. Frm other posts, I gather that it's lactation consulting that you want to go into, and that is defintiely not a high-paying career, even with a masters. It's unlikely that you'll be earning enough money as an IBCLC to comfortably pay off that student loan. Plus,that's a high interest rate, and honestly, I think that you would wind up frittering the money away here and there if you don't have a firm budget in place and get the spending under control. Have you gotten the daily shopping ventures under control? Shelved the Disney vacation idea? Gotten DH to be more reasonable about money instead of just thinking about his wants? Figured a reasonable cost for preschool? Did you switch to the interest-only loan for your mortgage, so that your mortgage payments might be changing upward in the future?

I really don't mean to be harsh, but I think that you and DH need to get control of your budget and be realistic about what you can afford both now and in the future. This loan might wind up being a noose around your necks