Credit Card Debt vs Credit Score and Financial Aid

[Tappinfool66]

Hey guys,

I tried searching previous threads but couldn't really find a specific answer, and maybe there isn't one.

Here's my issue - I have some credit card debt (a little less than $3000 right now) and I'm trying to figure out what impact this would have on my financial aid once I start medical school. Although I have some debt on one of my cards, I have two other cards with no debt, I've been on time with my payments and my credit score is good (730-750 range).

I recently got a little promotion at work, which comes with a little pay raise. If I work a lot and try to live very simply and cut corners through the fall and winter, I could probably pay it off completely before I'd need to fill out the FAFSA. However, the scribe salary I'm on wouldn't allow me to save up any money and I would likely have to work right up until starting medical school, which is something I REALLY don't want to have to do. Having at least one month (maybe two) to have time to myself and recharge before starting is something that I'd really like to have.

So, I was wondering, considering that I do have a good credit score, if it would be okay to still pay off some of my debt but also save up some money so I could leave work a month or two before medical school. Does your ability to get aid depend on your current debt, on your credit score or both? Does it depend on the school you're going to?

Sorry if this has already been answered and I just couldn't find it. Thanks in advance!

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[mik30102]

You can have all the credit card debt you want along if you are in good standing. Just don't ever let your credit card go to collections. That's what makes you not able to secure a federal loan.

 

[baxt1412]

You could seriously cut a lot of costs if you tried hard at it. Depends on how important it is to you. But for example, eating out, gym memberships, buying new clothes/shoes, smart phone plan vs normal cell phone, riding a bike vs driving, etc.

 

[Tappinfool66]

You can have all the credit card debt you want along if you are in good standing. Just don't ever let your credit card go to collections. That's what makes you not able to secure a federal loan.

Great, thanks for the response! Maybe I'll try and pay off some of the debt without worrying too much about getting it all gone by the time I have to file the FAFSA. Luckily the debt is on a 0% interest card

You could seriously cut a lot of costs if you tried hard at it. Depends on how important it is to you. But for example, eating out, gym memberships, buying new clothes/shoes, smart phone plan vs normal cell phone, riding a bike vs driving, etc.

Trust me, I know. I don't have a car and ride my bike to work, I don't go out often and I haven't bought new clothes (except for interview attire) in years. As a scribe, though, I've been making so little that even without spending a lot of money and buying a lot of new things, I've pretty much been living paycheck to paycheck.

 

[NickNaylor]

Most of the loans you get while likely be in the form of Stafford loans, which are not dependent upon your credit history. Your credit history becomes more significant if you need to rely on GradPLUS or private loans for additional financing.

It's always good to pay off debt; student loans not withstanding, you should pay it down as much as possible. However, I doubt it would make all that big of a difference from a loan eligibility perspective, though it might affect your rates.

 

[CharmanderMD]

Does anyone know if we'll be able to take out additional loans to pay off expenses like credit card debt? I was hoping to take out a few thousand extra so I could stop worrying about making credit card payments.

 

[NickNaylor]

Does anyone know if we'll be able to take out additional loans to pay off expenses like credit card debt? I was hoping to take out a few thousand extra so I could stop worrying about making credit card payments.

Highly doubtful. In fact, I would pretty much guarantee you won't be able to do that.

 

[baxt1412]

Does anyone know if we'll be able to take out additional loans to pay off expenses like credit card debt? I was hoping to take out a few thousand extra so I could stop worrying about making credit card payments.

the amount you can take out is determined by what the school says is living expenses i believe.


anyone feel free to correct me if i'm wrong.

 

[NickNaylor]

the amount you can take out is determined by what the school says is living expenses i believe.


anyone feel free to correct me if i'm wrong.

This is true, and many schools have very generous COL allowances, but a school won't loan you additional money above and beyond that strictly to pay off consumer debt. If you have extra money left over from your COL allowance, then that's another thing altogether.

 

[baxt1412]

or if you want to take out private loans... but these are likely to be adjustable rate and much higher rate than your gov loans.

 

[blueharbor]

You'll probably have some left over for repaying your credit card debt. Right now, I'm using my excess grad plus loans for the med school app cycle - I'll pay the CC debt off gradually with my med school loans.

For grad plus, stafford, you just have to make sure you haven't defaulted on a loan, gone bankrupt, or some other catastrophic thing. (There's a detailed list somewhere.) A high CC balance and a horrible credit score are both fine.