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Channeling Tuition Payments Through Your Credit Card??

Discussion in 'Pre-Medical - MD' started by dochoov, Apr 9, 2007.

  1. dochoov

    dochoov Intercalating Death Disk 2+ Year Member

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    I haven't had to take out loans for college so I'm a little clueless about this, but it would be sweet if it works. Given that you have a large enough credit line, is it possible to pay for your college and/or med school tuition with your credit card and then use your loan money to pay off your credit card? The purpose would obviously be for the points/miles. If this was possible I could save a total of about 1% on my med school tuition with my credit card points system. Has anyone ever done this?
     
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  3. ihatepaperwork

    ihatepaperwork 2+ Year Member

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    That is....an incredibly resourceful idea. Anybody know?!
     
  4. Dookter

    Dookter Senior Member 5+ Year Member

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    I seriously thought about that. I would have enough gas cards or whatever to last a lifetime....ha ha ha.
     
  5. jsnuka

    jsnuka Senior Member Moderator Emeritus 5+ Year Member

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    You cannot possibly be serious.:eek:

    Correct if I am wrong, but to have a credit line that high, you would have to either be rich, or your parents are rich and you are using their credit cards (in either case, why not just pay it upfront?):confused:

    I cannot imagine a recent college graduate being able to establish a credit histroy warranting such a credit line on his/her own accord.
     
  6. dabiophyz

    dabiophyz 2+ Year Member

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    Or file for bankruptcy and not need to pay for it at all after 4 years. How long can it take to build credit back up?
     
  7. Dookter

    Dookter Senior Member 5+ Year Member

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    You wouldn't have to be rich to do it. I know my parents have some wicked credit built up from owning a business and borrowing tons of $$ over the years. We don't have any money, but we sure do have credit...ha ha ha.
     
  8. jsnuka

    jsnuka Senior Member Moderator Emeritus 5+ Year Member

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    Hmm,ok.

    So you put it on a credit card, just to go ahead and use loans to pay it off.

    Even though you will now still ahve to pay back those loans.:confused:

    Am I the only one who sees the fallacy in this line of thinking?:sleep:
     
  9. Adcadet

    Adcadet Long way from Gate 27 10+ Year Member

    I looked into running my med school tuition through my Discover card for the 1% cash back (and by the love of God, pay it back every month!), but my med school doesn't take credit cards. I could have had Discover give me checks, but there's a fee for that and in the end it would have cost me at least 1% more to channel my tuition through a credit card.
     
  10. dabiophyz

    dabiophyz 2+ Year Member

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    I wonder...if you have good enough credit for an AMEX charge card that has no limit (not terribly difficult), what is stopping a young student from charging tuition, carrying a huge balance, declaring bankruptcy, then starting during residency build up credit again with the help of a significant other/parents (who are surely glad they saved 250k)?
     
  11. TMP-SMX

    TMP-SMX Senior Member Moderator Emeritus 10+ Year Member

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    That's what I did for undergrad.
     
  12. Robizzle

    Robizzle 1K Member 2+ Year Member

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    I'm no credit card expert, but I'm guessing it's for 1% cash back. 200k = 2k in yo pocket!
     
  13. CmePaddlin

    CmePaddlin Deciding the next step... 2+ Year Member

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    Universities dont generally take credit cards for big tuition payments? Why? Because they're smart and they probably have this little trick figured out. Credit card companies charge a few percent from the total of every transaction, and that is a few percent that the university loses with every payment. I looked into doing it with my Alaska card so I could get free plane tickets.
     
  14. jsnuka

    jsnuka Senior Member Moderator Emeritus 5+ Year Member

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    OK, $2K back, but you STILL have the loans to pay off, with their accompanying interest.

    Two grand is not enough for me to arrive at the same point. TOTALLY, not worth it.
     
  15. kdburton

    kdburton Ulnar Deviant 5+ Year Member

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    I paid my tuition last semester w/ my credit card, but then I paid it off as the semester went on.. All I did was get one of those balance-transfer checks from my CC company and write it out to myself, deposit it in my checking account, and then wrote a personal check to my school. If I wanted to I could have overpaid my tuition like this the same way while taking out loans and the school would have issued me a refund check for the balance. Assuming I would pay twice the amount (1x by student loans & 1x by CC), then I could immediately pay off my CC balance with the refund check I get back from the school.
     
  16. Dookter

    Dookter Senior Member 5+ Year Member

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    Look, it won't really work. But people [including me] have definitely thought about it. Think how many gas cards, free plane tickets, etc. you could get if you maxed out a credit card that has a really high limit with your tuition bill. Then you instantly turn around and pay the credit card bill with your loans. Like I said, it won't work, but it the finaid office and the loan people were willing to cooperate it would be a good idea.
     
  17. Dookter

    Dookter Senior Member 5+ Year Member

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    The point would be that you have $2K less to pay back. How does this not make sense? So take all those loans and subtract $2K that you got back from the credit card company.
     
  18. Robizzle

    Robizzle 1K Member 2+ Year Member

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    Erf?? You'd be at the same point, with a free flat-screen TV.
     
  19. Tired Pigeon

    Tired Pigeon 7+ Year Member

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    I pay on Amex; points work out to about 1 free plane ticket per semester.:)
     
  20. dochoov

    dochoov Intercalating Death Disk 2+ Year Member

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    You would have loans to pay off either way. Effectively channeling through your credit card would provide you with an extra 2k. Not effectively channeling through your credit card would not provide you with an extra 2k.
     
  21. Dookter

    Dookter Senior Member 5+ Year Member

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    A free tv and enough beer to watch football with your friends all season!
     
  22. jsnuka

    jsnuka Senior Member Moderator Emeritus 5+ Year Member

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    Yeah, Total Rewards is pretty school. I have not used mine yet.
     
  23. jsnuka

    jsnuka Senior Member Moderator Emeritus 5+ Year Member

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    OK, I will play along.

    Since few, if any prospective med students will have established an extensive credit history sufficient to have a credit card with the requisite limit necessary to do this type of transaction.

    All of this for $500 USD an academic year?:confused: :laugh:

    I do not think that flat screen TV is going to come until PGY 1, assuming that $500 is invested and that to get it from the CC company it does not violate the CC agreement.
     
  24. Dookter

    Dookter Senior Member 5+ Year Member

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    It won't work, ok? But if it would work, I am pretty sure about 9/10 med students would jump at the chance to do like 2 minutes worth of work a semester to make $500 a year.
     
  25. dochoov

    dochoov Intercalating Death Disk 2+ Year Member

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    I have more than a year before matriculation (if I may be so fortunate) and my credit limit isn't too far off from what would be necessary. I havn't had any difficulty in getting cash rewards from my credit card in the past. And it is confusing why someone would want $500... right..
     
  26. Robizzle

    Robizzle 1K Member 2+ Year Member

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    500 measly bucks to you could mean shelter, water, and food for months for someone else. THAT'S RIGHT! I PLAYED THAT CARD ON YOU!!!!
     
  27. dochoov

    dochoov Intercalating Death Disk 2+ Year Member

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    I've been consumed by greedy, money-hoarding impulses :eek:
     
  28. jsnuka

    jsnuka Senior Member Moderator Emeritus 5+ Year Member

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    :laugh: What happened to your plans for the flat screen TV?:confused:
     
  29. JohnMadden

    JohnMadden Political Refugee 2+ Year Member

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    I pulled this trick off in grad school a couple of times and it was awesome! I racked up some serious credit card points that I used for some free hotel stays. It also and it helped me INCREASE my credit limit with my credit card companies because it showed a history of large purchases and on-time payments...

    Why would it be beneficial to pay the tuition with credit card:
    1. Building/strengthening credit history (particularly for those with no history)
    2. Cash Back/ Points/ other incentives

    So whether you have an established credit history or none at all, there is a potential to benefit.

    How do you do it?

    If your school has online bill-pay, it's really easy to pull this trick off. Remember that tuition is generally charged on a semester or trimester basis. So the most your card will be charged at one time is around 18K (I realize most of you won't have a credit limit in this range).

    There is generally a timing delay between when the tuition charges are posted to your account and the disbursement of your loans. After the tuition charges are posted, you should log into the account and make a credit card payment of the amount of your choosing. Once your loans are posted, you will have a credit balance which will be refunded. Most of this stuff is automated and no one in the financial aid office would cares that much.

    If your school charges a flat convenience fee or a percentage it may not be worth it. However, if your school doesn't "charge" a convenience fee, believe me, it's built into the tuition anyway.

    Honestly, I think all medical schools should encourage this practice because it helps students build credit and manage debt after school. Giving students a seminar at the end of their fourth year is too late...
     
  30. JohnMadden

    JohnMadden Political Refugee 2+ Year Member

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    See my post above. It does work. I have the credit card statements to prove it. But no, I won't let you see them. Identify theft is a mother these days.
     
  31. NN11

    NN11 7+ Year Member

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    Clearly, you're unfamiliar with student loans, there is no way of getting out of them through bankruptcy. Student loans have some of the most aggressive debt collectors, they'll get their money one way or another, because the law is on their side.

    Besides, filing for bankruptcy is much more difficult than it used to be, thanks to the current Administration.

    Bottom line, there is no way out of Student Loans, well not exactly true! There are a few options, namely, serve as a physician in rural areas, join the military, and of course death. :laugh: Personally, the last option is not all that attractive to me.

    .
     
  32. tacrum43

    tacrum43 Behold the mighty echidna 7+ Year Member

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    MDApps:
    Sometimes (rarely) credit cards do issue those checks without the 3% fee. Read the terms carefully. Getting a big enough credit line would be a problem, however, for some school's tuition. Some apartment complexes do accept credit cards, which is nice for extra points too.

    In addition, I think it's technically illegal to pay off any "consumer debt" with loan money. But I doubt this is enforced strictly...I mean, a lot of students probably charge their groceries to a credit card.
     
  33. AnEyeLikeMars

    AnEyeLikeMars Member 7+ Year Member

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    All of what? I don't know if this would work, but it's definitely not time-consuming or labor-intensive.
     
  34. aspirationMD

    aspirationMD Rookie of the Year 2+ Year Member

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    sadly I know someone who did this ... it's kind of disgusting if you ask me, but it does happen and it does work.
     
  35. NN11

    NN11 7+ Year Member

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    Really, aspirationMD? This is news to me. I've read through the literature out there (not on SDN) and pretty much every source said that there is no way to get away with filing bankruptcy to get out of student loans. When did your friend do this?
     
  36. Tired Pigeon

    Tired Pigeon 7+ Year Member

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    I was wondering about a related point. Agree that student loan debt is non-dischargeable in bankruptcy, but if credit cards were used to pay off student load debt, would the credit card debt then be dischargeable in bankruptcy? Seems like this wouldn't be allowed, but I'm not sure why.

    And don't worry, I won't be doing it.:)
     
  37. NN11

    NN11 7+ Year Member

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    So here is something I found (which makes it sound like it is very difficult to get Student loans discharged as a result of bankruptcy):

    " The Bankruptcy Code does not define undue hardship, but in general, it means that your present income is inadequate to pay the loan and your future earning potential will not change the situation. It is very, very difficult standard to meet.

    You must be able to establish a number of things in your court forms:

    -Based on your current income and expenses, you cannot maintain a minimal living standard and repay the loan.

    -Your current financial condition is likely to continue for an indefinite period.

    -You made a good faith effort to repay the loans.

    -You have file for bankruptcy for reasons other than just to discharge your student loans."
     
  38. NN11

    NN11 7+ Year Member

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    You make a very valid point, yes they would be discharged in that case. But remember that if you don't pay the credit cards back (at least the minimum payment), they'll sue you immediately and get a judgment against you, which means you won't be able to get subsequent student loans. It's sorta self-limiting.
     
  39. kdburton

    kdburton Ulnar Deviant 5+ Year Member

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    I have a friend who faked his death after our senior year of high school to get out of a health club membership. His credit was ruined (still is), and he still has a couple years until everything goes back to normal. :laugh:
     
  40. NN11

    NN11 7+ Year Member

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    One more thing everyone should know:

    "Since October 1988, any student loan (which includes any educational benefit, scholarship or stipend) cannot be discharged in bankruptcy if it was either:

    -made, insured or guaranteed by a government unit, or

    -made under any program funded in whole or in part by a government unit or non-profit institution.

    Because virtually all student loans meet the above criteria, almost all student loans are nondischargeable."

    the part i don't get is when would you have to pay back a scholarship or stipend? aren't those considered grants? any thoughts, anyone?
     
  41. NN11

    NN11 7+ Year Member

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    what an eediot!!!
    [​IMG]
     
  42. scgroat

    scgroat New Member 5+ Year Member

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    I could not resist the urge to jump in. Since the schools are tied into FAFSA disbursement, I'm not sure that it would be possible to use a credit card. Also, in my experience most schools usually do charge an additional service fee. There are two other possibilities with credit cards that have not been mentioned.

    1) Given a $20+ thousand limit, one could likely take a promotional balance transfer at zero percent for up to 2 years

    2) One could secure a 3-4 % rate on the life of a given debt. This is much lower than the current rates for student loans, though deferrment has not been factored in.

    I'd be scared to do either of these, though, because your credit will be affected while you are in debt. A student loan, on the other hand, is government-backed and has little negative effect on credit (as long as you pay it). I'm sure there's a way to take advantage of good credit with your credit card, though.
     
  43. AnEyeLikeMars

    AnEyeLikeMars Member 7+ Year Member

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    Maybe they're referring to scholarships or stipends that are in some way conditional. The student gets the stipend/scholarship, fails to fulfill his/her end of the bargain, and then they're liable for repaying that grant money but try to get out of it by declaring bankruptcy.
     
  44. NN11

    NN11 7+ Year Member

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    that's what I was thinking too...:thumbup:
     
  45. Critical Mass

    Critical Mass Guest

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    I'm surprised that they haven't moved this to financial aid.

    The balance transfer check often serves as a cash advance with an associated service fee, so look at your terms before doing something like this.

    Regarding the student loan/bankruptcy thing, my take was the first person who mentioned it didn't intend to take any student loans but was rather suggesting that everything be simply charged to plastic and then discharged via bankruptcy. This would seem to be rather odd because the person would have had to build up a very good credit profile to have a limit like that only to throw it all out the window so easily.

    As to the JohnMadden scheme, schools who haven't caught up to it will eventually. One place I was at would automatically refund my balance to me every Friday into my checking account. If I wanted a cash advance with no fee, I would just go to the website and "pay" the school an amount that I didn't even owe them. It would then turn into a credit balance that would slide back into my checking account.

    If I wanted miles or whatever, I could easily just cycle the cash in my checking back around to the credit card company to complete the circle. I'm pretty sure that doing this consciously is illegal, and it didn't even matter to me because all of my cards were maxed out anyway.

    Schools that charge a service fee for using plastic (likely covering the vig that they have to kick to the cc company) solve this problem by making it cost prohibitive. I took some online classes a year ago in which they would only take plastic through a third party company (with an associated fee). The third party company had a lot more time to watch for laundering.

    None of the above schemes would work at those schools that wait for your loans to post before charging you tuition. Since federal money goes straight to the school and not the student, they are legally required to apply those monies to your outstanding bill before refunding you the remainder.

    In the grand scheme of things, this stuff seems pretty labor intensive. The credit card business is very much akin to Las Vegas. The house doesn't like to lose, and if they suspect that you are cheating, they will put an end to whatever you are up to.
     
  46. lsumedgirl

    lsumedgirl Livin' the dream! 2+ Year Member

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    Bankruptcy doesn't apply to student loans, so I imagine it wouldn't absolve any charges to a med school on a credit card. No matter what (barring death), you're stuck with paying for the med school education.
     
  47. TheGreatHunt

    TheGreatHunt High Performance 7+ Year Member

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    This is the reason that you can't do this... Jsnuka hit it right on the head
     
  48. AnEyeLikeMars

    AnEyeLikeMars Member 7+ Year Member

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    How so?

    The question is: $X in loans to repay vs. $X in loans to repay + $2000 cash back (or reward points, etc.)

    Obviously the second option is better. There reasons why this might not work, but I don't understand that argument.
     
  49. NYyanx28

    NYyanx28 7+ Year Member

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    If you die, don't your loans just get handed down to your "next of kin"?
     
  50. NN11

    NN11 7+ Year Member

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    I think that's only the case if you're married and have joint accounts with your spouse. Then if one person dies the other person is still responsible for the debts. Now if you die, debt collectors will most likely put a lien on your assets, this way your family won't be able inherit anything until your creditors have been paid. But I'm not sure of the details.
     
  51. Doctor Bagel

    Doctor Bagel so cheap and juicy Moderator Emeritus 10+ Year Member

    Federal loans are discharged when you die. :)
     

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