Can you pay off student loans with a credit card? Sure. It’s a free country. But maybe a better question is should you?
It can be really tempting to look for shortcuts to get rid of student loans—and you’re not the first person to get one of those 0% APR credit card offers in the mail and go “Hmmmm.” But we strongly suggest you put the envelope down and back away slowly. Let's dig in a little deeper.
1. Can you completely pay off a student loan with a credit card? Technically, yes
The tactic here is simple: you call the credit card company with the 0% APR offer, have them write a gigantic check to your student loan servicer, and knock off your entire student loan in one go. The benefit: You’re then making payments to the credit card company, not the loan servicer.
The problem with this tactic is that the introductory offer is introductory.
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The time limit on that 0% APR is usually about a year. If you don’t pay your entire balance back by the time the offer expires, your interest rate will skyrocket and you’ll be stuck paying a high interest rate.
How high? It depends on the card, but chances are it’ll be more than you’re currently paying on student loan interest. According to a recent CreditCards.com survey, average credit card APRs are currently at an all-time high of 16.99%.
So , unless you could realistically pay off your entire $38,291.47 balance within a year, this is probably not a great plan.
2. Can you make your monthly student loan payment with a credit card? Sometimes
So what if you didn’t put your entire student loan balance on the card? What if you just used the card to make your monthly payments, rather than writing a check to your loan servicer?
There are a lot of problems with this strategy. For one thing, you’re just paying off one kind of debt with another. And as much as you might dislike your student loans, they’re a much better kind of debt than credit card debt.
First, this is a great way to pay a lot more interest than you already do. Your student loan already charges you interest every month, and if you incur a balance on your credit card while you’re paying off student loans, you’ll have to pay interest on that, too.
Second, even a high student loan interest rate is usually lower than a credit card APR—as soon as that 0% interest rate expires, which it will. Late fees tend to be a lot higher on credit cards, as well—sometimes as much as 30%.
Third, if you fall behind on your payments, you have more options with student loans. Federal loans come with options such as deferment, forbearance, and income-based repayment plans that can help you out of a tough spot. Your credit card company will not be so forgiving.
Fourth, paying off your student loan this way may not even be possible. Which brings us to the next question:
3. Can you pay off Nelnet, Navient, Great Lakes, Fedloan Servicing, or other federal student loans with a credit card? Yes and no
Technically, the U.S. Treasury Department doesn’t allow student loan servicers—companies like Nelnet, Inc., Navient, or FedLoan Servicing—to accept those payments.
There are loopholes, though. Some people have had good luck calling Navient and Great Lakes, for example, to put through a one-time payment with a credit card. But that means you have to do all your payments over the phone.
You could also use a third-party bill payer service as a middleman; this company will write a check for your student loans after charging your card. Third-party bill payer services usually charge a fee per transaction. This could be a flat rate or a percentage—sometimes up to 3%.
Or you could do a balance transfer—although your credit card company may not let you do this if you’re planning to transfer the balance to a student loan.
Another option is to do a cash advance on your credit card, and then use that money to pay off your student loan. And we particularly don't recommend this tactic.
A cash advance isn’t the same as just withdrawing money from your checking account or putting a charge on your card. Cash advances come with fees, sometimes a percentage of the advance—as much as 5%. So if you’re paying off a $30,000 student loan this way, you’ll be paying an extra $1,500 just in fees. Yowch.
And ... that’s before we even talk about the interest. Those 0% APR offers apply to the balance of your credit card; they don’t necessarily apply to a cash advance. Your interest rate on a cash advance will depend on the fine print in the credit card.
See also: Is it Better to Pay Off Student Loans or Credit Card Debt First?
4. What about paying off student loans with credit cards for rewards?
The Internet is filled with blog posts from bright-eyed go-getters who will tell you all about the way they annihilated their quazillion-dollar student loan debt using their Citibank card. It’s possible, sometimes. Here’s how it’s done.
First, have good credit—these types of cards are usually for people with high credit scores.
Second, sign up for a rewards card. These cards typically come with cash back, points toward purchases, airline miles, and other rewards. But you’re looking for a specific type of reward: student loan redemption.
Before you pull the trigger on this plan, call your loan servicer. The credit card company will most likely send a check directly to them if you choose this reward, and not all loan servicers will accept a check from a credit card company. (See previous section.)
If the credit card company doesn’t offer loan redemption, you can also make this plan work by opting for a cash-back option—and then putting the reward money toward your student loan yourself. You have to be disciplined about that, though.
This approach works in your favor if you only put an amount on your credit card that you’re sure you can pay back every month—otherwise the interest rate will bite into any benefits you get from doing it.
The catch is that most rewards cards have a minimum spending limit before your rewards kick in—and the amount you get is tied to how much you spend.
So you may find yourself walking a tightrope here, between what you have to spend to get the rewards and what you can afford to pay back each month. Pay very close attention to the fine print, and proceed carefully.
There are better options than credit cards
If you’re struggling with your student loan payment, there are better options out there than slapping the balance on a 0% APR credit card and calling it a day. Here’s a roundup.
Refinancing
People refinance mortgages and other types of loans all the time to get a better interest rate and terms. You can do it with your student loans, too—and it works the same way.
When you refinance, what you’re actually doing is replacing all your existing student loans with a single loan, held by a single (private) lender. You can do this with both federal and private loans.
The big benefit to refinancing is that it’s a chance to score a lower interest rate. And while private lenders’ interest rates aren’t set in stone like they are with federal loans, there are some great deals out there.
For instance, some of the lenders we’ve vetted and listed on our site offer rates as low as 2.5% APR—or lower. Compare that with the best rate the federal government can offer: 5.05% for undergraduates on Direct Subsidized and Unsubsidized Student Loans, and the rates go up from there.
Refinancing can also reduce your payments by increasing the term of your loan—from ten years to, say, 15 or 20. This might result in paying more interest over time, but it can dramatically reduce the amount you pay on a monthly basis.
This is a tactic that works. Our data shows that borrowers can lower their payments by an average of $253 per month, or save over $16,000 over the life of their loan, just by refinancing.
Forbearance or deferment
These options are only for federal loans. Both let you temporarily halt your student loan payments while you get back on your feet. Both have their benefits and drawbacks.
Deferment
Of the two, deferment has the better terms.
When you get your federal student loans deferred, you pause payment for a specified amount of time. During this time, your interest usually doesn’t accumulate if you have subsidized loans. Types of federal loans that qualify for deferment include:
- Direct Subsidized Loans
- Subsidized Federal Stafford Loans
- Federal Perkins Loans
- The subsidized part of Federal or FFEL Consolidation Loans
You may qualify for deferment if you meet one of the following conditions:
- You’re enrolled in school at least part-time, or a graduate fellowship program.
- You’re in an approved rehabilitation training program for the disabled.
- You’re unemployed or can’t find a full-time job.
- You’re serving in the Peace Corps.
- You are experiencing economic hardship.
- You’re on active military duty.
Forbearance
Under forbearance, you also get to pause your student loan payments for an agreed-upon time. Unlike deferment, however, your student loan interest continues to accumulate while your payments are paused—so you’ll come out of this period owing more, and you'll have higher monthly payments.
Federal loans eligible for forbearance include:
- Direct Unsubsidized Loans
- Unsubsidized Federal Stafford Loans
- Direct PLUS Loans
- FFEL PLUS Loans
- The unsubsidized part of Direct or FFEL Consolidation Loans
There are two types of forbearances: general and mandatory. Under both, you only get to push pause for 12 months at a time. Once that period expires, you can request another 12 months, but there’s a three-year limit on this for some types of loans.
Your loan servicer is the one who decides whether you qualify. Reasons that might persuade them include:
- Financial hardship
- Unexpected medical expenses
- A lost job or decrease in salary, or
- Any other reason that tugs at their heartstrings (good luck).
Under mandatory forbearance, the loan servicer is required to approve you. The eligibility requirements include:
- You’re enrolled in a dental or medical residency or internship.
- You owe more than 20% of your monthly gross income each month.
- You’re serving in AmeriCorps and you received a national service award.
- You’re a teacher, and you qualify for teacher student loan forgiveness.
- You qualify for the U.S. Department of Defense Student Loan Repayment Program.
- You’re serving in the National Guard and you’ve been activated, but you can’t qualify for a military deferment.
Income-Driven Repayment Plans
Under the income-driven repayment plans, the federal government sets your monthly payment at what it considers to be an affordable rate—based on a percentage of your income and family size.
There are four different types of income-driven repayment:
- Pay As You Earn (PAYE)
- Revised Pay As You Earn (REPAYE)
- Income-Based Repayment (IBR)
- Income-Contingent Repayment (ICR)
Each one has slightly different terms and qualification requirements. Generally, your new payment will range from 10-20% of what the government considers your “discretionary” income, depending on the plan you qualify for.
See also: Comparing Income-Driven Repayment Plans
These can be a lifesaver for some people, but they have pitfalls, too. In some situations, your new payment could be set so low that you barely make a dent—and your interest accumulates as you pay.
Under some income-driven plans, you could get stuck in a nightmare scenario where your payments don’t keep up with your interest rate—and your student loan balloons even though you’ve been faithfully making payments. Do the math carefully and don’t let this happen to you.
See also: 'I Keep Paying, But It's Like Pouring Water Into a Bucket With No Bottom...'
Paying off your student loan with a credit card is a very iffy proposition. You’re exchanging one kind of debt for another, much worse kind that comes with higher interest rates—and we don’t recommend it.
But there are other options out there if you don’t like your existing interest rate. Check out how much you could save by refinancing.