Put Student Loans on Credit Cards for the Rewards? You May Want to Think Twice

Key Takeaways

It’s possible to pay private student loans using a credit card.
Credit card payments on a student loan could help you earn rewards, take advantage of a 0% interest offer or make your student loan payment on time.
On the flip side, using a credit card payment for student loans generally requires fees that outweigh the benefits of using a card to pay your loan.

You can’t lean on your credit card in a pinch to pay federal student loans directly, but you may be able to use a credit card for private loans. That could be handy if you need some payment flexibility or want to earn credit card rewards.

But when you use a credit card to pay student loans, you will face fees that could erase rewards value. You could also put yourself in credit card debt, which is far less forgiving than federal student loan debt.

Make sure you understand your options for paying student loans with a credit card before you proceed.

What Are Your Credit Card Payment Options for Student Loans?

Most loan servicers require cash payments, as in payments directly from your bank account. But if you want to pay with a credit card, log into your account and go to your payment options to see if that is an option. Check with your lender to confirm – and keep in mind that even if it’s an option, you’re likely to pay convenience fees.

If you can’t use a credit card to make student loan payments directly, you have a few options:

Use a third-party provider. Payment services such as Plastiq or Melio can make loan payments on your behalf with a credit card, but expect a fee. Plastiq and Melio charge a 2.9% fee when using a credit card to pay your student loans.
Pay with a convenience check. Credit card issuers may offer convenience checks you can use to access your line of credit and then pay bills, such as student loans. A convenience check is considered a cash advance on your credit card. When you use a convenience check, you will pay a cash advance fee, typically 3% to 5% of the check amount, and the check starts accruing interest immediately at a cash advance rate. That annual percentage rate may be higher than your purchase or balance transfer APR.
Make a transfer. Some credit card issuers allow you to pay loans with balance transfers. Check with the issuer and the lender before you make a transfer, and be prepared to pay a 3% to 5% balance transfer fee.

Any way you slice it, you will face additional costs with these methods. You could pay third-party processing, cash advance or balance transfer fees, plus a higher cash advance APR with no grace period. You’ll also owe interest if you don’t pay off your credit card balance by the end of a 0% introductory APR period or miss a credit card payment after that period ends.

Strategies for Using Credit Cards to Pay Student Loans

You may be able to use credit cards to pay student loans, although you’ll usually pay indirectly. You’ll need to do some math, but even with the fees, you could still save on interest, earn rewards or both. Here are a few strategies based on credit card features:

High credit limit. Be sure you have enough available credit to make student loan payments without using your entire credit limit. Using no more than 30% of your limit on any card is best for your FICO credit score.
0% APR. A 0% introductory APR or a balance transfer offer could help you save on interest when you pay your student loan. Let’s say you’re paying 13% interest on a private student loan. Take out a 0% balance transfer card, and you’ll come out ahead, even after you pay the 3% to 5% balance transfer fee. The trick is to pay off your card balance before the 0% APR expires and to not miss a payment.
Rewards. Maybe you’re less concerned with interest savings and just want some payback for paying back your student loans. Look for a card with a large sign-up bonus and a high rewards rate, such as 1.5% or 2%, on all purchases. After paying student loans for years, you could treat yourself to a vacation or shopping spree using your credit card rewards. Just make sure the value of the rewards is greater than the fees to use a credit card for student loan payments.

“Your best choice when using a credit card to pay off your student loans is to use a 0% intro APR card,” says John Schmoll, founder of personal finance website Frugal Rules. “Most options give an introductory period of 12 to 18 months. However, it’s important to pay off the card before the intro period is over.”

Choose a rewards credit card that offers a 0% introductory APR on purchases, and you could save on interest and earn rewards. For example, you could use a 0% APR rewards credit card to make a student loan payment with a third-party service. You’ll earn rewards on that purchase and then pay it off with no interest during the introductory period.

Find the Best Student Loans for You

Alternatives to Paying Student Loans With a Credit Card

If you’re struggling to keep up with student loan payments, try these options before you turn to a credit card:

Income-driven repayment. Available to federal student loan borrowers, an income-driven repayment plan can reduce your monthly payment based on your income and family size.

Consolidation. Another option for federal student loan borrowers, student loan consolidation combines your student loans into a single monthly bill with a fixed interest rate. You may get access to a new payment plan that lowers monthly payments.

Refinancing. Private student loan refinancing could offer a lower interest rate, lower payment or both. You can refinance private student loans into one new loan or combine private and federal loans, but you’ll lose federal loan protections if you do that.

Deferment or forbearance. Both are ways to put a temporary stop on student loan payments when you can’t afford them. The difference is that no interest accrues on certain types of federal loans in deferment, but interest continues to grow in forbearance. A pause on private student loan payments is up to your lender, but interest typically continues to accrue.

Certainly, consolidating or refinancing student loans could make payments easier to manage, but that depends on the details, says Andrew Housser, co-CEO and co-founder of Achieve, a digital personal finance company.

“If you can get a lower interest rate than the rate you’re consolidating from, it can make sense. Otherwise, you’re just moving debt around and not really solving the problem.”

Is Paying Student Loans With a Credit Card a Good Idea?

Paying student loans with a credit card is a stretch, though benefits may materialize if you approach it strategically. Consider these points before you take the plunge:

Fees. Fees are practically unavoidable when paying student loans with a credit card, and you may not be able to offset the cost with rewards.

Interest savings. You could save on loan interest with a 0% credit card, but you must pay off your balance before you owe interest.

Federal protections. If you’re considering paying federal student loan debt with a credit card, be cautious. Federal student loans have far more flexibility than credit cards, with income-driven repayment plans and deferment or forbearance options. You may also be able to take advantage of Public Service Loan Forgiveness programs.
Rewards. The rewards you earn from charging a student loan payment to your credit card could outweigh the fees, especially if you’re working toward a sign-up bonus. But do the math to make sure. For example, a 2.9% processing fee will cost you more than you’ll earn with 2% cash back.

Paying all student loan debt with a credit card means you’ll lose federal protections. That means paying off all of your student loan debt with credit cards is probably not a good idea, but you could come out ahead if you strategically pay off manageable chunks.

APR: 4.50% to 15.49% with autopay
Minimum FICO Credit Score: Mid 600s
BBB Rating: A+