You can pay student loans with a credit card by using an online bill payment service like Plastiq, or you can perform a balance transfer. A balance transfer moves your payment obligation from the student loan provider to the credit card issuer.
Paying your student loans with a credit card has benefits and drawbacks. The best part about paying with an online service is that you can earn rewards. If you do a balance transfer instead, you likely won’t earn any. But credit card interest rates tend to be a lot higher than student loan rates. So if you can’t pay off your balance right away, you could end up with more unsustainable debt. A 0% credit card could help, but you typically need good credit or better to get one, and it would only buy you time until interest takes effect.
Here’s how you can pay student loans with a credit card:
U.S. Department of Treasury rules prohibit making student loan payments directly with a credit card, as of 2017.
You can use online bill payment services like Plastiq to make payments on your student loans. These services charge your credit card, then send a check or wire transfer to the loan issuer.
Third-party services charge fees. For example, Plastiq typically charges 2.85% of the transaction amount, although they’ll sometimes have promotions for lower fees.
If you’re able to pay through an online service, you can earn rewards on what you charge.
If third-party services don’t work for you, another option is to instead transfer the balance to a credit card. This could get you a temporary 0% interest rate, but you’ll typically need to pay a 3%-5% balance transfer fee.
If the company doesn’t let you directly transfer the balance, you could use a balance transfer check, which is a check that draws on your credit line instead of a bank account. You can get one from your card’s issuer. Just bear in mind that standard balance transfer rates and fees will apply.
10 of the top 15 credit card issuers allow balance transfers from student loans: Bank of America, Barclaycard, Capital One, Citi, Discover, PenFed, USAA, U.S. Bank, Wells Fargo, SunTrust Bank.
Only Barclaycard allows you to earn rewards on balance transfers.
All in all, it’s not a bad idea to pay student loans with a credit card if you can earn some rewards and avoid carrying a balance on your card from month to month. But it shouldn’t be an excuse to put off paying your bills. You should also keep your card’s credit limit in mind. Student loan payments can be fairly large, and you risk hurting your credit score by using more than 30% of your available credit.
It depends. While making payments toward your student loans using a credit card may seem like a great idea, the fact is that many loan servicers don't offer this option. If you’re a private student loan borrower, you may be able to do that, but you’ll have to pay a fee. Most loan servicers require borrowers to pay through their checking or savings account.
You can pay a loan with a credit card directly in the rare cases it’s accepted, or by using either a credit card balance transfer or a third-party money transfer service to pay the loan. Most auto lenders, mortgage companies, and student loan providers will not accept credit cards as a form of payment for loans, and money transfer services can be expensive.… read full answer
If a lender won’t let you pay a loan with a credit card directly, try to:
Use a balance transfer credit card. Balance transfers are most commonly used to transfer credit card debt to a lower-APR credit card, but you can often use them to transfer loan debt, too. The balance transfer credit card issuer will make a payment to your lender for the amount you want to transfer, shifting that balance to the credit card. Just make sure your lender and your card issuer are not the same company – if they are the same lender, the transfer will be declined. Also, consider whether or not a balance transfer is a good idea for your situation.
Make loan payments with a third-party payment service. Some payment services, such as Plastiq or Western Union, allow you to pay bills with a credit card when you wouldn’t be able to otherwise. It’s not free, however – and in most cases, it’s not even cheap. Using these services with a credit card will rack up transaction fees that vary depending on which service you use, but typically the fees range from 2% to 3%. Not to mention that using a credit card with these services may count as a cash advance to your card issuer, which comes with its own fees and APRs. And in the case of Western Union, your lender may not accept this form of payment.
Unless your lender accepts credit card payments directly, it’s a good idea to consider the costs and benefits of paying a loan with a credit card – whether by third-party payment service or a balance transfer – before you do it.
For instance, if you aren’t able to pay off your credit card balance at the end of a balance transfer credit card’s promotional APR period, you’ll rack up expensive interest charges. And with balance transfers, there are usually balance transfer fees. On the other hand, if your third-party payment ends up logged as a cash advance on your credit card, there’s no grace period for that debt, and cash advances typically have their own higher APR. Plus, there are usually fees that come along with cash advances.
But if you’re in a position where paying with a credit card will avoid loan default, then these costs may be worth it.
It’s not explicitly illegal to use student loans to pay off debt from credit cards, but it could be considered a violation of your loan agreement. You’re supposed to use student loans only for your education and related expenses such as room and board, books, and transportation. Chapter 2 of the … read full answerFederal Student Aid Handbook has the full list.
There’s one major situation where using student loans to pay off credit cards is acceptable – if you have used your credit card to purchase goods or services related to your education. For example, you might have charged your textbooks or bought a bus pass or even paid for room and board. In that case, using the money from your student loans to pay off those expenses on your credit card is essentially the same as just using the loan to pay for them in the first place. The same goes for using your student loan to pay off a non-student loan that you used for school-related expenses.
But even if you do use a student loan to pay off debts that aren’t related to school, it’s relatively unlikely anything bad will happen, aside from you possibly running out of money for school. Student loan issuers don’t track your spending; they simply lend you money for school and expect it to be paid back per the terms of the agreement. Using student loans fraudulently – e.g. taking loans out but not actually going to school – is illegal. Using some of your funds for non-educational expenses is at worst a violation of your loan agreement. And if your loan issuer finds out, they could impose whatever consequences the agreement specifies for a breach. But they have no way of knowing what you spent the money on unless someone calls them up and tells them.
That said, the wisest thing to do is to not use student loans for any expenses that aren’t related to your education. If you do pay off educational expenses that you first charged to a credit card or bought with another loan, make sure all those purchases are documented. Keep your credit card statements and purchase receipts. That way, in the unlikely event that your loan issuer ever questions you, you can prove that the expenses were related to your education.
Finally, if you need to borrow money to pay off debt unrelated to your education, consider a balance transfer credit card or a debt consolidation loan instead of tapping into your student loan.
You can, but there's no real point to it. Unless you've got an awesome credit card, with 0% APR, or 0% balance transfer APR, then it's better to just pay it regularly.
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