My Greatest Financial Mistake: I refinanced $20,000 in credit card debt with a student loan


I figured it was wise to refinance high interest debt via a student loan. This is what I’ve gathered about good versus bad debt.

After graduation, I had around $7k0 in student loan debt, all of it accrued during the last summer at college. Until then, I had been lucky β€” my mom and dad had a college savings account for me that covered the bill for a couple of semesters at a private uni, a couple of years at a community college, and then at a state uni where I got my Bachelor’s.

But because of my personal failings, along with the absence of contact from my counselor, I came to what was supposed to be my last semester, only 6 credits from my Bachelor’s requirement. I’ve already drained the college savings account.

I did not dwell a lot on the conditions of the student loans that I signed up for to cash out for summer school. One of them was subsidized and one was not β€” that was the extent of my knowledge. I wanted to come out of college with a degree, and that was the way to do it. I have had peers who were in even worse circumstances, with moms and dads who could not or would not cash out for their school bills. Thus I got myself an appointment at tothe financial aid office, signed up for loans, and carried on.

I began my 1st semester in Creative Writing 3 years later. Since I did not have one of the much-wanted teaching scholarships, I was attempting to get my way by taking less credits and working part-time at the Registrar’s Office. By that moment, I had made some progress on paying off my undergraduate loans, but now that I’ve been a full-time student once more, it was in deferment, and I did not tackle the problem of making interest payments. I wish I’d learned more on refinancing my student loans across credit markets.

In my 2nd year of graduate school, I earned a partial scholarship and could have completed my Master of Fine Arts with a small amount to add to my previous student loan balance. Rather, I have made my greatest financial error.

I figured that student loans are “good debt”

Since talking to countless people about their student loan debt for my report on this country-wide issue, the single thing I would say to any high school student is that there’s nothing positive about student loan debt. Actually, it could be one of the worst forms of debt, because it’s almost unfeasible to get out of it.

But I did not realize this ten years ago when I took out the max graduate student loan cap to “refinance” around $20k in credit card debt.

My logic was this: such debt had a far smaller interest rate than credit card debt.

What I did not know was that the student loan balance would balloon as easily as revolving credit card balance.

Refinancing debt does not mean that you got rid of it

When I was eighteen years old, I got my first $500 limit credit card and easily maxed it out shopping. My mother promised to assist me pay off the balance if I got rid of the card and I did not get a new one. I stayed true to the commitment into my 20s, and I formed lots of negative sentiment towards credit card debt all in all.

When my hubby and I met and I heard about his debt, I was adamant about getting rid of it ASAP. But, refinancing credit card debt into a student loan doesn’t equal paying it off. It does bring some satisfaction, but all in all, it turns out you just move debt around – to a lower interest rate, of course, but it remains there. And I didn’t even talk about what are the circumstances that get you to that moment.

What happens if I cannot afford your student loan payments?

Research indicates that optimism may have a negative impact on your finances. For instance, people in the States usually are certain successful times await them, as well as better paychecks.

This was definitely the case for me, as I pictured a college teaching position when I graduate. Instead, I never cracked $30k on my yearly tax returns.

It didn’t matter much until my first pregnancy came, because my partner had a full-time position with health insurance. But when I had to take out a leave, our costs ramped up with the new arrival.

I forbeared my student loan debt, now combined via fedloan, in one payment of around $500-$600 per month. When I returned to my job and was able to afford the payments, the outstanding interest capitalized on the balance of the loan and my min. payment per month was higher.

I was meeting my loan payments for 8 years in an on and off fashion, yet the balance was bigger than the one I began with. Meanwhile, I accumulated some credit card debt once more to deal with the differences between what we were earning and spending.


Last autumn, thanks to the selling of our first home, I was in the position to pay off what was left of student loan balance – around $36k. Without that, I would still be struggling with it, making payments of around $800 each month, almost a rent or mortgage payment.

I’m budgeting more and trying to save up a bit. And these days, when I overhear someone thinking of doing the same as me – taking out student loans for refinancing higher-interest debt, I just want to shake them and tell them ‘No.’

You can sell your home if you cannot meet your mortgage payment. If you cannot afford a credit card payment, you are able to file for bankruptcy. But student loans are forever. The lone way to get through this kind of debt is through it.