How to Get Rid of Pesky High Interest Student Loans
By Jona E. Kessans & Terry Rigg

Currently student loans are at an all time low interest rate, which is 
a great deal for those currently attending college.  But, if you’re like 
me and attended college in the nineties or in the eighties then you know 
that there was no such thing as a low interest rate.  The best you could 
hope for was around 8.25% and usually 9 or 10%.

By today’s standards, this is outrageously high and loans with interest 
rates this high are darn near impossible to pay off in a decent amount 
of time.  Moreover, by the time all of the interest is paid it almost 
doubles the loan amount.  I guess you could say this is the magic of 
compounding in action.  And unlike traditional loans that can be financed
 at a lower 
rate, student loans don’t have this option available.  So, most people just 
trudge along and continue to pay year after year after year.

However, after some research and creative financing I have come up with 
a viable way to get around high interest rates thus shortening the time 
it takes to pay off old loans and pay less in overall interest.

Basically, I contend that one of the best ways to eliminate student 
loans quicker and at a much lower interest rate is to transfer the old loan 
onto a credit card that offers a low to no interest rate on balance 
transfers.  To verify this I asked my friend Terry Rigg, owner of The 
Budget Stretcher (http://www.homemoneyhelp.com) to do the comparison 
calculations.

Here’s a comparative analysis he did.  A student loan in the amount of 
$15,000 at 9% with a payment of $300 per month would take 5 years 3 
months to pay off with a total interest amount of $3,870.56 in interest.

However, by transferring this same $15,000 to a low interest credit 
card with an interest rate of 3.9% for the life of the balance transfer, it 
will only take 4 years 7 months to pay off making the same $300 per month 
payments.  The total interest paid would be $1,337.90: a total savings 
of $2,532.66 with a pay off eight months sooner.

This method isn’t for everyone, but it is a viable option for those who 
wish to unload old high-interest student loans once and for all.  And, 
obviously, good credit is a necessity to obtain low balance transfer 
rates.  However, before making the decision to use this method, it’s 
wise to go over the pros and cons of each method.

The Pros and Cons of Keeping High Interest Student Loans

Pros:
·  Student loans can be put into deferment/forbearance if you should 
ever 
experience economic hardship.
·  Interest on student loans can be used as a tax write-off for a 
certain 
number of years.
·  In certain very rare cases, student loans can be forgiven.

Cons:
·  Student loans continue to accrue interest while in 
deferment/forbearance.
·  Interest on student loans transferred to a credit card is not 
eligible 
for a tax write-off.
·  It is next to impossible to have student loans forgiven.

The Pros and Cons of Transferring Student Loans onto a Low Interest 
Credit Card

Pros:
·  Faster pay off time and less interest paid.
·  Bankruptcy can be filed on credit cards if you experience economic 
hardship.

Cons:
·  Credit Card amounts can’t be put into deferment/forbearance.
·  Miss a payment or be late making a payment means loosing a low 
interest 
rate.

Obviously there are pros and cons for both sides.  Most important, 
however, 
is your level of tolerance where debt is concerned.  For many people, a 
seemingly never ending cycle of payment after payment made to high 
interest student loans with the majority of each payment going toward
 nterest is a huge burden.

I don’t recommend this as an option for people already on the precipice 
of conomic failure, but rather for people just looking for an alternative 
way to eliminate old student loans quicker and cheaper.

Each person should weigh their situation carefully before deciding to ake 
this or any other route where student loans are concerned.  For me, 
this presented an excellent option to finally rid myself of an old pesky 
student loan once and for all.

Jona Kessans is the editor of Simple & Frugal News and the Simple & 
Frugal website http://www.simpleandfrugal.com: a website dedicated to 
providing information to those on the journey to simplifying their lives.  She 
has been practicing simple living/voluntary simplicity for over 10 years and is 
available for speaking engagements. She can be contacted at 
mailto:simplefrugal@fuse.net.  

Terry Rigg is the author of Living Within Your Means - The Easy Way 
http://www.homemoneyhelp.com/ebookadpage.html and editor of 
The FREE Budget 
Stretcher Newsletter and Budget Stretcher web site 
http://www.homemoneyhelp.com. He has 25 years of experience
counseling individuals and families concerning their personal finances.