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Ask Money

Student loans vs credit cards

Chris Farrell May 20, 2010

Question: I have about 10K in credit card debt that I stupidly accumulated in undergrad and after college before I was able to land a job. I have my bachelor’s degree. I would like to get my master’s degree. My current employer has a program that will reimburse me directly for the tuition of an approved plan. I plan to enroll in a graduate program here in Chicago either this fall or early next year. I will need to take out student loans to pay upfront the cost of tuition anywhere I go. Here’s my question: should I use the money I’ll receive at the end of each period to pay off the student loans or should I use that money to pay off the much higher interest credit card debt I have. They cut me a check directly after I provide a transcript proving my grades and a receipt proving my payment (from the student loans). I’m leaning toward using the money to pay off credit card debt, but would like your input as to any drawbacks. Thanks, Jon, Chicago, IL

Answer: First of all, it’s terrific that you are advancing your skills and boosting your career by getting your employer to foot the bill. It’s good for both of you


Your employer ends up with a more knowledgeable worker and you limit the amount of debt you take on while getting a masters degree. The big price tag, I imagine, is a lack of sleep.

I agree with you: I’d use the money to eliminate the credit card debt. Hopefully, you’ll enjoy future pay hikes thanks to your added credentials and skills learned in the masters program. You can then use the extra money to attack the student loans.

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