Can You Pay Student Loans With Your Credit Card? It is feasible to pay off student loans with a third-party payment system or a line of credit.
But these methods are high-risk and expensive, however. In most cases, you’ll have to pay additional fees as well as possible interest.
The good news? There are other options available! But, in most cases, you won’t be able to pay off your student loans with credit cards straight toward the lender or provider.
But there may still exist some other solutions to help you pay your private/federal student loan directly to the lender.
- Can You Pay Student Loans With Your Credit Card?
- 5 Things to Do When Using a Credit Card to pay For your Student Loans
- Why You Should Avoid Using Your Credit Card to Pay your Student Loan?
- 1. Make Monthly Payments by Credit Card Using a Third-Party Provider
- 2. You Can Pay Your Student Loan With Your Credit Card
- 3. Transfer a Student Loan Debt to a Credit Card
- 4. Take Out a Cash Advance on Your Student Loans
- 5. Refinancing Your Student Loan To Get Better Terms
- 6. Consolidate Your Student Loans To Pay Only Once
- 7. Apply for Student Loan Forbearance
- 8. Enroll In Income-Driven Repayment
- Frequently asked questions
Can You Pay Student Loans With Your Credit Card?
Yes, you can, but federal student loan providers will not let you pay your debt using a credit card directly. Instead, you must use a payment service such as Amazon Pay, which acts as an intermediary for a fee.
Furthermore, if student loan lenders allow you to pay your loans using a credit card, they may charge you a transaction fee.
Lenders don’t like to take payments via credit card, so they aren’t going to do it.
There are several credit card providers who provide student loan balance transfers or cash advance convenience checks that may be used to pay off student loans.
Convenience checks are not balance transfers and have a high APR, whereas convenience verification do not qualify for the zero percent deal.
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5 Things to Do When Using a Credit Card to pay For your Student Loans
1. You Must Make a Monthly Minimum Payment
If you miss a payment for your student debt or are late in making one, you may be subject to a penalty APR.
The penalty APR’s for missed payments and late payments can start from 29.99%.
2. Don’t Use Your Student Loan Balance to Exceed Your Credit Card Limits
You can only move a balance up to the amount you qualify for.
If you have $20,000 in student debt but are eligible for a credit limit of only $10,000 on a balance transfer card, you will be able to transfer just $10,000.
After a year has passed, the $10,000 will be added to your student loan debt.
The utilizing more than 30% of your credit limit is not advised since a high credit utilization rate can harm your credit score.
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3. Get Pre-Approved Before You Apply For a Student Loan
You should only apply for credit cards that are tailored to your specific needs and that you believe you will be accepted for.
A pre-approval can tell you if you’ll be accepted and the amount of credit available to you before your application is approved.
Knowing your credit limit is important for balance transfer cards since they allow you to compare rates and select the best card for your needs.
Pre-approvals are a kind inquiry that does not harm your credit score, and they shield rather than harm your credit rating.
4. Avoid Paying for Annual Fees
Annual fees may reduce any savings you make by paying student loans using a credit card.
Look for a credit card that doesn’t include an annual charge.
If you get a credit card with an annual charge, make sure you save at least as much as the yearly cost when paying educational debts using that card.
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5. Consider Using a Credit Card With the Lowest Interest Rate
Search for a card with a low APR that allows you to pay off the entire outstanding balance before it incurs interest.
Why You Should Avoid Using Your Credit Card to Pay your Student Loan?
Because Most schools don’t allow you to use a credit card to pay your bills when you’re in school and are required to make cash payments for your student loans.
There are 8 alternatives to choose from:
1. Make Monthly Payments by Credit Card Using a Third-Party Provider
You can pay your student Loan with a credit card using services like Amazon Pay, but you’ll be charged a transaction fee on each payment.
2. You Can Pay Your Student Loan With Your Credit Card
Some private lenders allow students to pay down their debt with a credit card, which some borrowers use in order to earn points.
The lender will almost certainly charge you a transaction fee.
3. Transfer a Student Loan Debt to a Credit Card
Some credit cards provide the ability to transfer your student debt, which can be useful if you qualify for one of the 0% APR balance transfer deals.
You’ll have months to pay off the outstanding amount interest-free, which may make sense if you know you’ll be able to get rid of the debt before interest kicks in.
4. Take Out a Cash Advance on Your Student Loans
You may be able to borrow against your credit line if you have a credit card.
While this cash can be utilized to pay for a student loan in an emergency.
Cash advances have significant fees and interest rates that can rise as high as 25%. Consider it a last resort alternative.
Note: student loan interest charges may be lower than credit card interest rates.
The interest rates on your credit cards are likely to be far greater than those on your student loans (Unless you’ve taken advantage of a 0% APR offer or paid off your bill in full right away).
When it comes to paying down your student loans, be sure to keep a good credit score by not only paying on time but also keeping credit card balances low.
The percentage of your total credit limit that you’re using is known as your credit utilization ratio. Credit usage is the second most important factor in determining your credit score after payment history.
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5. Refinancing Your Student Loan To Get Better Terms
That is especially good option for individuals with smaller incomes who may be unwilling to take on a new debt at today’s low interest rates.
It would also apply to those wanting to refinance their student loan because of the lower monthly payment.
Many people do not want to refinance every month in order to save money, but if the rate drops, it may make sense in the long run.
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6. Consolidate Your Student Loans To Pay Only Once
Consolidating student loans is similar to refinancing in that it combines multiple loans into a single new loan.
However, it will not lead to a lower interest rate. Instead, it may lead to a longer repayment term, resulting in a smaller monthly payment and preserving access to federal loan benefits.
If you want to pay off your loan debts over a longer period of time, income-driven repayment is a superior alternative since it also qualifies you for forgiveness.
Note: Student debts must be consolidated in order to be eligible for income-driven repayment.
7. Apply for Student Loan Forbearance
Both federal and private student loans enable you to postpone payments for a period of time. If your money difficulties will only last a short time while you’re unemployed, for example you can seek deferment or forbearance to avoid repaying your student loans.
If you have government-subsidized or Perkins loans, Only forbearance is available to private loan borrowers, and lenders frequently give it in shorter time frames than the federal government does; interest will continue to accrue during deferment.
8. Enroll In Income-Driven Repayment
This is the greatest choice for federal student loan borrowers who are concerned about paying off their loans in the long run.
Income-driven repayment plans limit student loan payments to 10% to 20% of your disposable income (what you have left after taxes and necessities), and any remaining debt will be forgiven after 20 or 25 years.
An income-based repayment choice is not available with private loans. However, you may inquire about whether there are options to decrease your student loan payments.
Frequently asked questions
A credit card may not be used to pay off federal student loans directly, but you may be able to utilize credit to pay off your private student debts.
There are several benefits and drawbacks when using a credit card to pay off your student loan debt (We discussed above).
After seven years, student loans do not go away. There is no intention to forgive or terminate debts after 7 years.
If you default on your student loan debt after more than 7 years of monthly payments and it has been more than 7 years since you made a payment, the debt may be erased from your credit report if you comply with certain conditions.
Yes, owing a student loan will affect your credit score. Your student loan amount and payment history will be included in your credit report. Making on-time payments can help you keep a good credit rating. In contrast, failing to pay off obligations will harm your credit score.
Marie got her journalism degree from the University of California and is an award-winning financial journalist, who’s responsible for collecting and analyzing information concerning students and young adults within the world of finance.
Marie has spent her career with more than 5 years writing for unique media outlets like Yahoo finance, GoBankingRates, and CNBC. She also teaches them how to plan strategically to get out of loan debts easily.
Her goal is to educate students about the different stages in life that involve finances so they can get their money’s worth.