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[YareYare]

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[Pikablue]

I used leftover study abroad scholarship money to travel so 🤫 it’s not the same as a loan but I imagine if you can budget the loan amount you take out for COL, you can take a small vacation and pay off at least some of the credit card. I've guilty of using my cards for COL items so I get the struggle. A tip I’d have is to take out a travel credit card and pay for a trip with that since many have sign-on bonuses and you’ll get miles or $200-300 cash back. Only do this if you can pay it back though.

 

[Rachapkis]

Here is my old-man take, which is easier said than done: Be careful with using student loans to pay off credit card debt. Doing so may violate your loan agreement, which may require you to use the money for educational purposes. I suspect this will not be an issue if you become a doctor, but you also need to remember that student loan debt, unlike credit card debt, typically cannot be discharged in bankruptcy. Finally, I would counsel against borrowing on credit cards (which charge quasi-usurius rates) to a finance vacation. It will likely end up being a very expensive vacation.

Here's why: One of the most important financial concepts to understand--and to leverage to your benefit--is the time-value of money. When you save money (e.,g., in your 401K plan), compound interest rates cause it to grow appreciably over time. For example, if you invest money at an 8% annual compounded rate of return, your money will double in about nine years. Thus, $100 invested at age 27, will become $200 at age 36, $400 at age 45, $800 at age 54, and $1,600 at age 63 (about the time you're ready to retire). Of course, when you borrow money--particularly at 20% on a credit card--the opposite is true (e.g., if you borrow $100 at 20%, you will owe $200 in about 3 1/2 years, $400 in 7 years, $800 in 10 years, etc.).

Good luck in medical school!

 

[LizzyM]

Here's my take: You are permitted to take loans to cover "cost of living" while in school. No one audits how you use that money. You could be buying groceries or buying a wedding cake, paying for a subscription to the New England Journal or a subscription to Netflix. No one cares. You can pay off your credit card bill and then live on $417 less each month than would otherwise be allotted for living expenses. In all likelihood, the interest rate on the student loan is less than the interest rate on the credit card so in the end, you are in a good place..

On the other hand, you've paid off a debt that can be discharged in bankruptcy and taken a loan that can't be paid off in bankruptcy. That shouldn't matter if you don't expect to end up in bankruptcy but it might be a consideration.

How much vacation are we talking about? Whatever you can't pay for in cash might end up costing you double when you consider how long it might take to pay it back with interest.

 

[mistafab]

If you’re asking the internet permission to borrow money to pay off borrowed money, and borrow money to go on vacation - then my answer is no.

You need to change your behaviors asap or you’ll be another paycheck to paycheck doctor.

 

[RangerBob]

Do what you need to do regarding the current credit card debt. But I would advise you (and all others) to never use a credit card for anything other than convenience only. (ie., pay it off every month, and only use the credit card because it's better than carrying around $1000 in cash, and you get points with it unlike a debit card).

If you can't learn to use a credit card that way, then shred your credit cards. Seriously. The only time a credit card should carry a balance is for a legitimate emergency.

 

[YareYare]

If you’re asking the internet permission to borrow money to pay off borrowed money, and borrow money to go on vacation - then my answer is no.

You need to change your behaviors asap or you’ll be another paycheck to paycheck doctor.

Thank you for your response!

Yeah thinking about it, it is a pretty stupid idea to use my CC to pay for ym vaction. Would it also then be super unreasonable to use a little cash (~$300) to take a small vacation before starting school? I know that the best move would be to put it towards my CC, but I really feel like I need just a small getway before starting more shcool, as I have been pretty nose to the ground for the past few years.. I feel that for the most part that my spending habits aren't what caused me to be in this situation, as I live pretty frugally. I just happened to have a big, unexpected expense (major car issues) that came up which drained a good chunk of my funds which meant that I had to most of the costs of applying to med school on my CC on top of some other necessities.

I guess I was asking to see if I can use my borrowed money (school loans) to pay off my higher interest borrowed money so that I can more easily pay it off down the line when I am in a more favorable financial situation rather than now and have a "clean slate" going into med school.

I guess I should add as well that I am still actively working to pay it off.

 

[YareYare]

Do what you need to do regarding the current credit card debt. But I would advise you (and all others) to never use a credit card for anything other than convenience only. (ie., pay it off every month, and only use the credit card because it's better than carrying around $1000 in cash, and you get points with it unlike a debit card).

If you can't learn to use a credit card that way, then shred your credit cards. Seriously. The only time a credit card should carry a balance is for a legitimate emergency.

Yeah, I definitely learned my lesson a little while ago regarding managing a CC and didn't ever really use it until recently. I definitely have learned a lot of lessons in regard to being more financially literate. Most of this CC debt is due to me having major car issues which drained my emergency fund and really screwed my finances. Most of the debt is from covering the money I did not have to pay for the bill on top of all the costs that came with applying to medical school as all of my savings were gone and my paychecks were barely covering living expenses and bills.

 

[YareYare]

Here's my take: You are permitted to take loans to cover "cost of living" while in school. No one audits how you use that money. You could be buying groceries or buying a wedding cake, paying for a subscription to the New England Journal or a subscription to Netflix. No one cares. You can pay off your credit card bill and then live on $417 less each month than would otherwise be allotted for living expenses. In all likelihood, the interest rate on the student loan is less than the interest rate on the credit card so in the end, you are in a good place..

On the other hand, you've paid off a debt that can be discharged in bankruptcy and taken a loan that can't be paid off in bankruptcy. That shouldn't matter if you don't expect to end up in bankruptcy but it might be a consideration.

How much vacation are we talking about? Whatever you can't pay for in cash might end up costing you double when you consider how long it might take to pay it back with interest.

Thank you for taking the time to answer!

Nothing crazy for the vacation, more like a weekend getaway with my girlfriend, at most $300 total which I could cover for with cash.

Thats good to hear, I definitely am working to cut down on the amount I owe, but will definitely consider budgeting my CC into my student loan budget. Will def be eating a lot of beans and rice my first year lol.

Do schools typically have something that bar students from working? While I def wouldn't have a job interfere with my studies, is it common for people to maybe work per diem or one to two shifts per week?

 

[YareYare]

Here is my old-man take, which is easier said than done: Be careful with using student loans to pay off credit card debt. Doing so may violate your loan agreement, which may require you to use the money for educational purposes. I suspect this will not be an issue if you become a doctor, but you also need to remember that student loan debt, unlike credit card debt, typically cannot be discharged in bankruptcy. Finally, I would counsel against borrowing on credit cards (which charge quasi-usurius rates) to a finance vacation. It will likely end up being a very expensive vacation.

Here's why: One of the most important financial concepts to understand--and to leverage to your benefit--is the time-value of money. When you save money (e.,g., in your 401K plan), compound interest rates cause it to grow appreciably over time. For example, if you invest money at an 8% annual compounded rate of return, your money will double in about nine years. Thus, $100 invested at age 27, will become $200 at age 36, $400 at age 45, $800 at age 54, and $1,600 at age 63 (about the time you're ready to retire). Of course, when you borrow money--particularly at 20% on a credit card--the opposite is true (e.g., if you borrow $100 at 20%, you will owe $200 in about 3 1/2 years, $400 in 7 years, $800 in 10 years, etc.).

Good luck in medical school!

Thank you for your detailed response!

Yeah, I think i might just do something small using some cash if I do take a vacation rather then put it on my CC. Looking at it now, it definitely would be ridiclous to pay for a vaction using my CC.

 

[YareYare]

I used leftover study abroad scholarship money to travel so 🤫 it’s not the same as a loan but I imagine if you can budget the loan amount you take out for COL, you can take a small vacation and pay off at least some of the credit card. I've guilty of using my cards for COL items so I get the struggle. A tip I’d have is to take out a travel credit card and pay for a trip with that since many have sign-on bonuses and you’ll get miles or $200-300 cash back. Only do this if you can pay it back though.

I feel like I see you in every other thread that I am in lol.

Oh, that is nice! I stupidly did not apply to any scholarships when I was younger, and I now have many regrets lol. Where at did you travel?

 

[LizzyM]

Do schools typically have something that bar students from working? While I def wouldn't have a job interfere with my studies, is it common for people to maybe work per diem or one to two shifts per week?

Schools may have different policies. If they do permit working and you do poorly on an exam, you may be advised to give up or cut back. Casual, part-time tutoring can be lucrative in the right market and much of that is done online now, too, so it is not geographically limited. See if that pays better than what you'd be paid as a per-diem. You might want to arrange something that allows flexibility so you can take off in the run-up to each exam.

 

[anon2]

OP, some hard advice here.

I understand you had a car-related emergency, and that is a sadly common story - statistics show a large fraction of Americans can't handle a $400 unexpected expense without borrowing.

We all get messages about saving up for an "emergency fund", which is a reasonably good idea (I don't though), and you're trying to rebuild it. The thing is, credit card debt, generally at 20% interest or something absurd, is its own top-priority financial emergency. Don't think about having an emergency fund until the emergency is over.

If you have any money in the bank that is not specifically earmarked for something that is even higher priority, life-or-death items such as "paying rent" or "getting food to eat" - especially that $300 you were planning to take a vacation with - immediately throw all of it at the CC. Two months ago.

Refinancing using a student loan to cover CC is a generally good idea - you immediately reduce the interest rate to something less insane, at the price of not discharging it in bankruptcy. Planning for bankruptcy as an out isn't the best idea anyway. The logistics are simple since money is fungible; they can't track which dollars are used for which expenses.

But the real hard advice comes here: take a good long look at your spending patterns, aside from the emergency. Are you living paycheck to paycheck? Most importantly, what happens when you have some financial good fortune and more money shows up in your bank account? If your instincts are "take a $300 vacation", or some form of "spend most of it", then what's stopping you from clearing the CC, and immediately running it back up again on impulse purchases?

Our capitalistic society works by exploiting people like you, with obscene amounts of advertising and other lobbying to psychologically manipulate people into buying random crap that isn't worth it. You've experienced a dip into the world of having all your earnings drained away by debt slavery - CC interest, payday loans, etc. The only real solution is to control your impulses to spend, so that you're saving money no matter how much you make.

Just another example of how capitalism is rigged: I use CCs as much as possible, even on 4, 5-digit purchases. Why? I get large rewards, at least 2%, up to 5, 10% back, to the tune of thousands of dollars a year. And how do the banks fund these gifts to me? By charging usurious interest on things like your CC balance. It's a truly regressive system of financial transfers upwards. The only time I've ever carried a balance was by mistake, and it was costly, but less than the rewards I get, since I only mess up once every 3-5 years.

As an extreme case (don't take this as a requirement, just a possibility capitalism tries to hide), I was a FAANG senior engineer. I deliberately refused to spend more than the median income, despite earning 10x that, even in NYC/SFO. The flip side is I'm retired after 10 years of work, starting from zero. I make more doing nothing but watching the stock market than I spend, so I literally never need to work again. What I make is a 1% problem; the truly critical part is "what I spend".