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What You Should Know About Paying Student Loans With a Credit Card

What You Should Know About Paying Student Loans With a Credit Card
Melissa Brock
Melissa BrockUpdated August 11, 2022
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Your student loan servicer or lender will not allow you to directly make federal student loan payments with a credit card. However, you may be able to make private student loan payments with plastic, though you'll likely have to use a payment service.Before you dig out your wallet, it's worth exploring some pros and cons of using your credit card to pay for student loans.We'll go over how to pay student loans with a credit card. We'll also list other options besides using credit cards—no matter how tempting those travel rewards points may be. 

Paying Student Loans With a Credit Card 

If you've been wondering, "Can you pay student loans with a credit card?", there are a few potential routes you can take.
  • Third-party platform: You might have to know your way around a third-party platform and possibly be okay with being charged a transaction fee. (A third-party lender is a company that provides loans to companies or customers by taking on the risk of default, frequently online lenders.) It's a good idea to calculate how much these fees will add to the overall cost of your student loans over time.
  • Direct credit card payments: In specific situations, you may also be able to make credit card payments for student loans. For example, if you're running late to make your monthly student private loan payment (as in, it's the next day), you might have this option available to you.
  • Balance transfer: A balance transfer allows you to move existing debt to a credit card. You may want to take advantage of a student loan balance transfer on a credit card that offers a 0% APR period. During that 0% period, you may plan to pay off your loans in full. However, it's important to note that you'll pay a transfer fee, which will add to the cost of your student loan balance.
  • Cash advance: A credit card cash advance is a withdrawal you can make from your credit card account. Cash advances usually carry high fees and interest rates. The interest rates can go into the double digits. It's best to explore other options rather than execute a payoff strategy that could have an interest rate of 20% or more. 
Credit cards have risks, including taking on too much debt, missing payments, interest charges, and going over your credit utilization limit by taking on too much credit. When you're figuring out how to pay student loans with credit cards, it's important to know that you could take on these types of risks as well.

Should I Pay Off My Student Loans With a Credit Card?

It's easy to see why paying your student loans with credit cards might seem attractive: cash back, points and miles offer significant perks, and so does building credit with a credit cardEven so, it's not a great idea to put loan payments on credit cards because they usually carry a higher interest rate. In 2021, the average credit card interest rate in the United States was 16.45%, whereas the average student loan interest rate is currently around 5.8%. If you can't pay your balance in full, you could inadvertently pay a higher interest rate on your student loans than you're already paying.

Other Options to Help Pay Student Loans 

If you shouldn't make student loan payments with a credit card, what other options are available to you? You could also consider federal student loan consolidation, deferment, forbearance, or refinancing. Let's walk through each one of these (better) options. 

Federal Student Loan Consolidation 

A federal Direct Consolidation Loan means that you combine several federal student loans into one loan. You end up with one monthly payment per month and can say goodbye to making multiple payments. You can also switch variable-rate loans, which are loans that change interest rates, to a fixed interest rate, which never changes.Consolidation can also lower your monthly payments, which means that it lengthens the amount of time (up to 30 years) that you repay your federal student loans. Note that this means you'll pay more interest over time because you extend your repayment.Consolidation may also give you access to income-driven repayment plan options and Public Service Loan Forgiveness (PSLF) but you may also lose certain borrower benefits like interest rate discounts and others.To apply for a Direct Consolidation Loan, submit the application online or download and print and submit a paper application. Continue to make payments on your loans until your consolidation servicer confirms your Direct Consolidation Loan.

Deferment or Forbearance 

Student loan deferment and forbearance both mean that you can stop making payments on your student loans for a certain period of time. The main difference between the two is that in deferment, no interest will accrue to your loan balance. Interest does accrue on the loan balance on student loans in forbearance.You can apply for deferment by following by learning about the requirements applying using the request forms. You may qualify if you're undergoing cancer treatment, experiencing economic hardship, enrolled in a graduate fellowship program, currently in school, an active duty member of the military, a parent who received a Direct PLUS loan, or are in a rehabilitation training program, and/or receive unemployment benefits. Student loan forbearance means you can stop making payments or reduce your monthly payments for up to 12 months at a time. It can be extended if you continue to meet eligibility requirements. You can apply for two types of forbearance — general and mandatory forbearance. You can get general forbearance for: 
  • Direct Loans 
  • Federal Family Education Loan (FFEL) Program loans
  • Perkins Loans 
Those who qualify for mandatory forbearance may be in a medical or residency program, in an AmeriCorps position, in an applicable teaching program, partial repayment of your loans under the Department of Defense Student Loan Repayment Program, a member of the National Guard or you meet other requirements. 

Student Loan Refinancing 

Student loan refinancing means that a new lender pays off your old loans to your old lender in exchange for one new loan with new terms. This must happen with a private lender. Here's a quick overview of how student loan refinancing works: Once you find a lender with lower interest rates, you can fill out the application for a refinance. After you receive a new loan, you make payments to your new lender. The point of refinancing is to get a lower interest rate so you pay less in interest over time or opt for a longer repayment term that will lower your monthly payment. (However, in this case, you'll pay more in interest over the life of your loan.)Just note that you can only refinance student loans with a private lender — you cannot refinance federal loans or private loans into new federal loans. You will also give up federal student loan benefits, such as federal forbearance options and income-driven repayment plans.Recommended: Pros and Cons of Refinancing

The Takeaway

Ultimately, it's not a good idea to pay off student loans with a credit card. There are so many other options available to you. Your best bet is to research each option and decide whether one method over another might be best for you. Your loan servicer can also give you some insight into which method will save you the most money over time.To learn more, discover student loan rates for refinancing with Lantern by SoFi.
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The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.LCSL0422002

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About the Author

Melissa Brock

Melissa Brock

Melissa Brock is a higher education and personal finance expert with more than a decade of experience writing online content. She spent 12 years in college admission prior to switching to full-time freelance writing and editing. Her work has appeared on Yahoo Finance, Entrepreneur, Investopedia, The Balance, FinanceBuzz, The Journal of College Admission, MarketBeat, College Finance, Rocket Mortgage, LeverageRx, Benzinga, Morty, Ally, and more.
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