Can You Pay Student Loans With a Credit Card?
If you’re having trouble repaying your student debt, you may get to the point where you wonder: “Can you pay student loans with a credit card?” The answer is that although it’s technically possible, using a credit card to make student loan payments can be risky and expensive.
So, before turning to your credit card, make sure you understand the costs and downsides of this move and explore some possible alternatives.
How can you pay off student loans with a credit card?
Regulations limit what payment methods you can use for which student loans.
For federal student loans, the government prohibits using credit cards to pay your loans. You’ll find that loan servicers clearly state on their sites that credit cards aren’t an acceptable payment method. (Although check out the warning below.)
Private student loan lenders, on the other hand, can decide to handle payments differently. But even here, many private lenders also prohibit the use of credit card payments.
Below are some workarounds if you still want to use a credit card to pay your loans. Note, however, that there are significant drawbacks to keep in mind.
- Charge your payment on your card
- Use a third-party service
- Take out a cash advance or convenience check from your credit card
- Complete a balance transfer
Warning: Beware of servicer error
Warning: Beware of servicer errorThe Consumer Financial Protection Bureau (CFPB) has found cases in which customer service representatives of several federal loan servicers mistakenly accepted credit cards as payment methods in the past. But because credit card payments violate the servicers’ policies, servicers later reversed those payments, causing borrowers to accrue late fees and other penalties.
1. Charge your payment on your card
Some private student loan companies will in fact accept credit cards as a payment method.
How it works
If your loan servicer accepts credit cards, you may be able to make a payment through the website. However, some lenders require you to contact them first.
For example, Firstmark Services, a major loan servicer for several private student loan companies, allows you to use a credit card in some cases, but you must first call its customer service department.
Risks
Using a credit card as a student loan payment method generally means you’ll pay a much higher annual percentage rate (APR) unless you’re able to repay the statement balance in full every month.
According to the Federal Reserve, the average credit card interest rate as of November 2022 was 20.40%, while student loans APRs are typically in the single digits. Over time, using a credit card can significantly add to your overall repayment cost.
2. Use a third-party service
Although federal loan servicers and many private loan companies do not accept credit card payments, there are some workarounds. One possibility involves using a third-party payment processing company.
How it works
You pay the third-party service with your credit card and provide them with your loan servicer’s information. The payment processing company then pays the servicer on your behalf through an accepted payment method, such as a wire transfer or paper check.
Common options for student loan payments include Plastiq and Doxo.
Risks
Besides the higher APR you’ll pay on credit cards, this approach involves additional fees. Third-party processing companies typically charge a percentage of the payment amount. For example, Plastiq charges 2.9% for card payments — so if your payment were $250, you’d pay an additional $7.25 in fees.
3. Take out a cash advance or convenience check from your credit card
Many credit cards allow you to take out cash advances or request convenience checks. These tools act as short-term loans. You borrow against your credit card’s credit limit to access an up-front sum of cash.
How it works
When you request a cash advance, the credit card issuer will deposit the money to your bank account. You can then use that money to make a payment to your loan servicer.
In the case of a convenience check, the issuer will send you a blank check that you can write out to your loan servicer.
Risks
Most credit card companies charge higher APRs on cash advances than on regular purchases, and you might also pay an additional processing fee.
The APR on cash advances can be as high as 36% or more. Cash advance fees can be flat amounts or a percentage of the advance.
For example, your credit card’s cash advance fee may be $10.00 or 3% of the cash advance, whichever is greater. If you took out a cash advance of $250 to cover your student loan payment, the fee would be $10.
Credit card rewards: Why they might not be worth the cost for student loan payments
With some credit cards, you can earn rewards in the form of cash back, airline miles or points that you can redeem for gift cards, travel arrangements or statement credits.
Although the idea of earning rewards for your student loan payments may be appealing, the high fees and APRs of using a credit card for this purpose may negate the value of those rewards.
4. Complete a balance transfer
Still, you might ask, “Can I pay off student loans with a credit card some other way?” One last possibility is to take advantage of a balance transfer credit card, moving your loan balance onto a new credit card.
How it works
Some credit card companies allow you to transfer loans, including your education debt, to a credit card. If you qualify for a 0% introductory APR (or at least a low interest rate), you could have several months to repay the balance without accruing big interest fees.
If you can pay off the balance before the promotional period ends, you could save money.
Risks
The low introductory APRs advertised by balance transfer cards have limited durations. Typically, the promotional APR only lasts for 6 to 12 months. After that, the regular APR applies, so you could end up paying double-digit rates on your student loans.
Plus, transferring student loan debt to a credit card is risky. Credit cards don’t have the same protections as student loans. For example, if you have federal loans and transfer your debt to a credit card, you’ll lose access to valuable benefits like income-driven repayment or special student loan forgiveness programs.
Alternatives to paying student loans with credit cards
As you can see, using a credit card to pay your student loans isn’t a good idea in most scenarios. In fact, the Consumer Financial Protection Bureau explicitly advises against it.
But if you’re in a bind and considering using a credit card so you won’t miss a payment and to avoid loan delinquency, here are some alternatives that may be better for you:
- Student-loan forgiveness
- Income-driven repayment (IDR)
- Deferment or forbearance
- Federal loan consolidation
- Refinancing
- Credit card rewards payments
1. Student-loan forgiveness
Depending on the type of loans you have and your employment, you may be eligible for loan forgiveness through federal programs like Public Service Loan Forgiveness (PSLF) or Teacher Loan Forgiveness. There are also some repayment grants that can be used for both federal and private loans.
How it works
Through loan forgiveness programs, federal loan borrowers can qualify for partial or full loan forgiveness based on their work:
- For PSLF, borrowers can qualify for forgiveness if they work for a nonprofit organization or a government agency full-time for at least 10 years and make 120 qualifying monthly payments.
- For Teacher Loan Forgiveness, federal loan borrowers can get up to $17,500 in loan forgiveness if they teach for five full, consecutive academic years in a low-income school.
- For grants and other options that can apply to both federal and private loan repayments, start by checking with your state education agency.
Why it’s a better choice
If you qualify for loan forgiveness, it eliminates your debt, so of course you no longer have to make any payments toward your loans.
2. Income-driven repayment (IDR)
IDR plans are alternative payment plans for federal loan borrowers that allow you to reduce your payments significantly.
How it works
IDR plans have longer repayment terms — 20 or 25 years, depending on the program — and base your payments on your discretionary income. Some borrowers qualify for payments as low as $0.
If you still have a balance at the end of the new loan term, the government will discharge the remaining balance.
Why it’s a better choice
It’s free to apply for an IDR plan, and you can dramatically reduce your monthly payments.
3. Deferment or forbearance
Loan deferment or forbearance programs allow you to pause or postpone your payments.
How it works
If you are returning to school, have lost your job, become ill or have another unexpected financial emergency, you may be eligible for a loan deferment or forbearance. Federal loan deferments and forbearance tend to be the most generous, but some private student loan companies have financial hardship forbearance options, too.
Why it’s a better choice
Rather than using a credit card to avoid missing payments, deferments and forbearance programs allow you to postpone your payments for several months until you get back on your feet.
4. Federal loan consolidation
Federal loan consolidation, which allows you to combine your loans into one, may give you access to a longer repayment term and alternative payment plans.
How it works
If you have multiple federal student loans, you can combine them — and retain your federal loan benefits — with a Direct Consolidation Loan.
You can choose a loan term as long as 30 years, likely giving you a smaller monthly payment. And by consolidating, you may get access to other payment options. For example, federal Perkins or Parent PLUS Loan borrowers who consolidate their loans can then qualify for an IDR plan.
Why it’s a better choice
Federal loan consolidation is free, and it might give you a more affordable monthly payment.
5. Refinancing
If you have student loans with high interest rates, you can potentially qualify for a lower interest rate by refinancing your debt. A refinancing loan can potentially save you money via the better rate, or it might reduce your monthly payments via a longer loan term.
How it works
Refinancing refers to a strategy where you take out a new loan and use it to pay off your existing accounts. Instead of having several loans, you’ll have just one. And if you have good credit (or a cosigner with good credit), you may qualify for a lower interest rate or longer repayment term, which can result in a lower monthly payment.
Student loan refinancing is primarily best for those with private student loans. For federal loan borrowers, refinancing can be risky since it transfers your debt to a private lender, making you ineligible for federal benefits like IDR plans or loan forgiveness.
Why it’s a better choice
Refinancing is free, and it can result in a lower monthly payment. And if you qualify for a better rate than you currently have, you could save a significant amount of money over the life of your loan.
You start your search by checking out our list of the best refinancing lenders online.
6. Credit card rewards payments
Although using a credit card to make your payments isn’t usually advisable, there is another way your card could chip away at your debt: By applying your credit card rewards to your student loans.
How it works
With rewards cards, you can earn cash back or points when you use your card to make purchases. You can usually redeem those rewards for statement credits or even deposits to your bank account. In this way, you can apply your rewards as a student loan payment without fees or interest.
There are even two credit cards that offer cash back benefits specifically for student loan repayment:
- Laurel Road: Laurel Road’s Student Loan Cashback card has no annual fee. You’ll earn 2% cash back on every purchase if you redeem those rewards to make payments toward your student loans.
- Sallie Mae Accelerate: With the Sallie Mae Accelerate card, you can redeem your rewards for 2% cash back toward your student loans. Like Laurel Road’s card, the Sallie Mae Accelerate card has no annual fee.
Why it’s a better choice
With these options, you can repay extra on your student debt without interest or fees — just so long as you pay off your credit card statement balance in full every month.