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The risks of using credit cards to pay tuition and student loans

With college tuition costs continually on the increase and the job market slow to improve, many college students and graduates find themselves struggling to make tuition and student loan payments. The stress of being unable to make payments can be considerable and sometimes leads debtors to turn to credit cards as a solution. Using a credit card to pay college tuition and student loans, though, involves certain risks.

One of the potential costs of paying tuition with a credit card is convenience fees. Convenience fees vary from school to school to school, with some school charging a convenience fee of nearly 3 percent and others charging no fee at all. The average is 2.62 percent, which can add a good amount to a large tuition bill. Convenience fees are not the only risk of paying for college education with a credit card, though. Depending on the type of credit card one uses, one can end up paying significant late fees if one misses monthly payments. 

For college graduates, using credit cards to pay of student loan debt is a similarly sticky issue. In many cases, actually, lenders will not even accept credit card payments for student loan debt. Those who do may charge significant fees. In terms of the card lender, the interest rate is likely to be a lot higher than the student loan interest rate. For those who are unable to pay off the credit card in time, the costs of using accredit card could be great.

Some people figure on using a credit card to pay off student loan debt in order that they have the ability to discharge that debt in a later bankruptcy. As readers may know, student loan debt is non-dischargeable in bankruptcy except under extreme conditions, so credit cards are sometimes viewed as a way out. However, one of the big risks of using a credit card to pay student loan debt is that one will probably not be able to have the debt discharged anyway, and one might end up being accused of fraud.

Needless to say, those who can find another way to manage tuition costs other than credit cards should do so. For those who have serious issues managing their student loan debt after graduation, there are alternative options for making payments. Those who are under extreme circumstances may be able to have their student loan debt discharged in bankruptcy, and should consult with an experienced attorney to have their case evaluated.

Source: USA Today, “Beware paying college fees with credit cards,” Susan Tompor, October 12, 2013. 

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