Paying for College: Student Loans or Credit Cards?

Research conducted by student loan company Sallie Mae shows that in 2010, about 5 percent of students earning an average of more than $ 2,000 in tuition and other educational expenses to credit cards to avoid taking out student loans. The same study showed that 6 percent of parents use credit cards to pay on average nearly $ 5,000 in education expenses for their children's college.

use credit cards wisely to avoid debt college loans? Financial advisors are in almost universal agreement that the answer is no, but that did not stop thousands of families from using credit cards at the parent and student loans.

Some families might think that all debt is equal to, other people may think that they will not qualify for college credit. So what exactly do the benefits of education loans offered by credit card?

1) The availability of

Particularly in recent years, such as credit card companies have tightened credit conditions in the feeding lax lending that led to the foreclosure crisis, credit cards have become harder to qualify for, generally only available to customers with strong credit. Many consumers with poor credit have had their credit lines reduced or eliminated altogether.

federal college loans, on the other hand, are available with no minimum credit requirements. Government funded Perkins loans and Stafford loans issued to students in their name, without a credit check and no income, employment, or co-signer requirements.

federal parent loans, known as PLUS loans, no income requirements and require only that no major adverse credit items - recent bankruptcy or foreclosure, holds federal education loans, and delinquencies of 90 days or more.

In other words, do not pay credit card simply because you think you will qualify for school loans. Chances are, these days, you're likely to qualify for federal college loans than credit cards.

2) with a fixed interest rate

While most credit cards carry variable interest rates, federal student and parent loans are fixed rate loans. With a fixed interest rate, you have the security of knowing that your student loan rates and monthly payments will go even when general interest rates do.

Many credit cards also will penalize you for late or missed payment raise interest rates. Federal school loans to maintain the same rate, regardless of payment history.

3) Deferred payment

repayment of both federal student loans and Federal Parent Loans can be deferred until six months after the student leaves school (nine months for Perkins loans undergraduate ).

with a credit card, however, the bill is due immediately, and the interest rates on credit card balance is generally much higher than the interest rate charged on federal school loans.

If you are experiencing financial difficulty, federal loans and offer more payment deferment and forbearance options that can allow you to defer payments until you get back on their feet.

Even the largest private student loans - without any federal education loans offered by banks, credit unions and other private lenders -. Offer you the option to defer payment until after graduation

Please note, however, that even while your payments are deferred, interest and private student loans, as well as federal loans to parents and unsubsidized federal student loans, will continue to accrue.

If there seems to be nervous deferred college loan debt that is growing slowly accumulating interest charges, talk to your lender about in school, advance options that can allow you to pay at least the interest every month on school loans on its balance sheet would not was higher, while still in school.

4) income-based repayment options

When you start repaying your college loans, federal loans offer extended and income-based repayment options.

extended repayment plans to give you more time to return, reducing the amount you pay each mjesec.Dohodovnih repayment plan scales down your monthly payments on the permissible percentage of their income, so that your student loan payments are not eating more than its budget, but you can live with.

Credit cards do not offer this kind of flexibility of repayment, regardless of your employment, income or financial situation. Your credit card will require a minimum monthly payment, and if you do not have the funds to pay for it, your credit card company can start collecting activities to try to recover the money they owe.

5) tax advantages

Any interest you pay on your parent or student loan debt can be tax deductible. (You will need to file a 1040A or 1040EZ instead of 1040, to deduct student loan interest .)

On the other hand, interest on credit card purchases, even when the credit card used for a renowned educational expenses can not be seized.

To check the suitability of any tax deduction on college loans, consult your tax advisor or refer to IRS publication 970 of "tax breaks for education", available on the IRS website.

6) Student Loan Forgiveness Programs

While the only way to escape your current credit card debt is to have it written down in bankruptcy, several loan forgiveness programs exist that provide partial or total student loan debt relief to eligible borrowers.

generally, these loan forgiveness programs will pay off part or all of its undergraduate and graduate school loan debt in exchange for a commitment from you to work for a number of years in high demand and insufficient area.

of the federal government sponsors public loan forgiveness program, which will write off the remaining debt of the federal education loan you have after you've worked 10 years in public service jobs.

Other federal, state and private loan forgiveness programs will pay federal and private student loans for a variety of professionals -. Veterinarians, nurses, rural doctors and prosecutors, among others

Ask your employer and do a web search for student loan forgiveness programs in your area of ​​specialty.