I have approximately $8000 in credit card debt, the majority of it being tuition payments. I thought I’d be able to pay it off by now, but due to unforeseen circumstances, I’m not able to. I want to get apply for an Unsubsidized Stafford Loan to pay it off.
When the money is dispersed, it is sent directly to the University you attend, and if the “loan disbursement amount exceeds your school charges, the school will pay you the remaining balance of the disbursement directly by check or other means.” My account balance at my University is $0, so if I apply for $8000, I should get a check for the amount. I will use all of that money to pay off my credit card debt.
The official government website states : “You may use the loan money you receive only to pay for your education expenses at the school that is giving you the loan. Education expenses include school charges such as tuition, room and board, fees and indirect expenses such as books, supplies, equipment, dependent child care expenses, transportation and rental or purchase of a personal computer.”
My question is: Is this allowed? I’ve searched and found very little; just advice from people who suggest not to use student loans to pay off auto debt and such. I feel like I’m cheating the system somehow.
I can only respond with an anecdote - I was unable to get a student loan to pay for an unpaid past balance at the school. Something had gone wrong and one term’s loans didn’t ever get disbursed; I didn’t find out until I tried to register for the next term, when they said I couldn’t register because I had an unpaid balance. The place I had my other loans from said I couldn’t use one of their loans to pay a past balance, I had to come up with a way to pay that on my own, get registered, and then they’d give me another loan. You do get any extra back from the school, I know (that happened to me on another occasion) but the place I was going through, at least, wouldn’t disburse without me being registered, and I couldn’t register without paying the past balance.
It’s allowed if you are still attending the university full-time. It will be a lot more difficult if you are no longer attending classes there. You can put anything you want on the loan and say it is a “school expense.” And, truth is, you can probably justify it morally, as you most likely did wind up spending more than $8000 on the acceptable items. All you are doing is reimbursing yourself for out-of-pocket expenses.
Like I said, the main problem is whether you are still considered to be attending the university. I don’t think the university is able to get the money in the first place if you aren’t.