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I have one more year of graduate school and I am considering paying tuition with my credit card (2.0 introductory rate) as opposed to taking a student loan for 8.9 or 9.5%. This would mean about $15,000 spread over three cards. If I closely manage the rates, I figure I can keep them below 9% even after the intro rates end in June 2001. This seems like a good idea but something tells me there may be something in the scenario that I am not taking into account. I welcome comments.

So, you are saying that you can save $1000 in interest charges (2% interest vs. 9% interest on $15,000), roughly, over the next year by paying with your credit card.

Some thoughts:

1) In order to maintain a 9% APR on your credit card, you may have to transfer the balance. I have never done this myself, but I understand that it often involves a transfer fee of about 3%. If you have to do this more than once, then you probably want to stick to the student loan. In addition to the fees, balance transfers can be a hassle because you don't know exactly when the transfer will take effect.

2) Student debt is treated more favorably than other debt. You may be able to deduct the interest on your taxes. Or, you may be able to get part of it forgiven if you work in a community-service related occupation, or if you join the Army Reserve, or if you become disabled (the details depend on the loan program). You can't do this for credit card debt.

These are the main drawbacks I can think of.

-- Edmund Ross
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