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You typically can't pay student loans with a credit card directly to your student loan servicer or lender.
It's possible, however, to use a third-party payment service or a line of credit to pay student loans—say, by transferring them to a card with a 0% APR period or by taking out a cash advance. But these options are risky and expensive. In nearly all cases, you'll pay extra fees and potentially more in interest.
Instead, if you're struggling to afford your loans, look into options to reduce or pause payments. Or, if you have the means to pay off your loans in full and want to earn credit card rewards in return, first calculate how much you'll pay in fees; it may not be worthwhile.
Why Paying With a Credit Card Might Not Be a Good Idea
The companies that collect student loan payments generally require cash payments and don't allow you to use a credit card to pay your bills. The following options are available to you instead, but they all come with downsides:
- Use a third-party provider to make monthly payments by credit card. Services such as Plastiq allow you to pay bills with a credit card, but you'll pay a transaction fee on each payment (Plastiq charges 2.5%, but fees can vary). This charge will add to the cost of your loan.
- Pay off a student loan balance with a credit card. Some private lenders allow student loans to be paid off with a credit card, which some borrowers do to get rewards. The lender usually charges a transaction fee, however, which could be significant on a large student loan balance and outweigh any potential rewards. You'll also need a credit limit that can accommodate your student loan balance, but pay attention to your credit utilization ratio.
- Transfer a student loan balance to a credit card. Some credit cards allow student loan balance transfers, which could be beneficial if you qualify for a 0% APR balance transfer offer. You'll have a period of months to pay off the balance interest-free, which could make sense if you know you can get rid of the loans you transferred in that time. But in most cases, you'll pay a fee—often 3% of the transferred balance—which will add to your debt load.
- Pay student loans using a cash advance. Your credit card issuer may allow you to get a cash advance on your credit line. While you can use this money to make a student loan payment in an emergency, cash advances come with extremely high fees and interest rates that can exceed 25%. Consider this option a last resort. You're likely better off looking into other ways to get relief from student loans, which we'll cover later on.
Interest fees charged by your student loan issuer might sting, but it's very likely your credit card interest charges will hurt even worse. Unless you've taken advantage of a 0% APR offer or immediately pay off your bill in full, you're likely to pay steep credit card interest fees. The average credit card interest rate is currently more than 17%, which could lead to substantially higher costs over time.
Take care to protect your credit score while paying down your student loans—not only by paying bills on time, but by keeping credit card balances low. As your balance rises, so does your credit utilization ratio, which is the portion of your total credit limit you're using. Credit utilization is the second most important factor in your credit score, after payment history. Generally, credit scores suffer as utilization grows past 30%.
Other Ways to Get Help With Student Loan Payments
If you're considering using credit cards due to a cash shortfall, there are many other ways to avoid falling behind on student loan payments. Try these alternatives:
- Income-driven repayment: This is the best option available to federal student loan borrowers who are concerned about affording their loans long term. Income-driven repayment plans limit student loan bills to 10% to 20% of your discretionary income (what you have left after taxes and buying necessities), and you'll also be forgiven any balance that remains after 20 or 25 years. Private loans generally don't offer income-driven repayment. But you can ask your lender about opportunities to reduce your interest rate or pay interest only for a period of time.
- Deferment or forbearance: Both federal and private student loans come with options for pausing payments temporarily. If your financial hardship will last a short time—while you're between jobs, say—you can apply for deferment or forbearance and get a break from student loan bills.
For federal loans, the option you'll qualify for depends on your circumstances. If you have subsidized or Perkins loans, the government will cover the interest that accrues during deferment. Only forbearance is available to private loan borrowers; lenders often grant it in shorter increments than the federal government does, and interest will always accrue.
- Refinancing: If you have good or excellent credit, you may qualify to refinance your student loans to a lower interest rate. Your monthly payment likely won't shrink substantially unless you extend your repayment term, but that can cut into interest savings.
For many borrowers, that keeps refinancing from being a money-saving move month to month. But over time, with a lower rate, you could save significantly on student loan interest. Keep in mind that refinancing turns federal loans into private loans, meaning you'll lose access to income-driven repayment and generous deferment and forbearance options.
- Consolidation: Federal student loan consolidation is similar to refinancing in that it replaces multiple loans with a single new loan. But it won't give you a lower interest rate. Instead, it can lead to an extended repayment term, giving you a smaller monthly payment, and it lets you maintain access to federal loan benefits.
If you're seeking a lower payment for your federal loans, income-driven repayment is typically a better option so you're also eligible for forgiveness. In fact, you must consolidate certain types of federal loans in order to make them eligible for income-driven repayment.
Pairing Credit Cards With Student Loans
Paying student loans with a credit card isn't always a wise choice, due to fees and interest charges that can add up fast.
A better idea if you're eager to make use of your credit cards? Applying points or cash back rewards you receive on card purchases toward student loans. Some credit cards let you do this directly. But more commonly, you can ask for your rewards in the form of a check or bank account transfer, rather than a statement credit, and use it to make student loan payments.
Before using credit for loan payments, get clear on how much it will cost so that you can streamline your finances without putting your credit score or cash flow in jeopardy.