Credit card holders can often take cash advances on their accounts. To get the money, they use their cards similar to a debit card at an ATM or go directly to a related financial institution. Credit card companies impose limits and fees for cash advances.
The money received can be used for any purpose, including the repayment of student loans.
Interest rates on cash advance loans can be two to three times higher than that of regular credit card purchases. Therefore, using the money to pay off a student loan comes at a high price. A cash advance is usually not subject to an interest-free grace period like a regular credit card purchase.
This means that interest is incurred even when the money is repaid in full within the month.
There are other options for student loan repayment. When an individual with Federal Perkins Loan, FEEL Loan, or Direct Loan is facing a financial hardship, loan repayment may be deferred. Economic Hardship Deferment lasts for a maximum of 36 months and must be reapplied for every 12 months.
This buys the student some time to get the finances back in order and no interest or penalty is imposed for subsidized loans during the deferral period.
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