Can you pay student loans with a credit card, Yes or No?
The answer to question, can you pay student loans with a credit card is described as follows: Almost two thirds of college students are currently graduating with student loan debt, with the total debt load reaching $50,000 as of 2018. Such loans are faithfully paid off by millions of people, but even the most conscientious borrowers can find themselves in a pinch: a job loss, a deteriorating medical condition or some emergency that leaves them unable to meet their monthly payment.
Can you place a student loan payment on a credit card in such situations? Not outright.
Student loan servicers do not, in general, accept credit cards. Federal laws, for one thing, usually forbid it. So, it will be quite difficult to pay student loans with credit card. In addition, any credit card purchase requires processing fees that are charged as payment by the party who accepts the card. Certainly, lenders won’t pay such fees the way retailers do. (As with any other cost of doing business, shops can handle credit card fees by factoring them into their prices.)
Using an intermediary as a way to pay student loans with a credit card
One choice is to use an intermediary service when you can’t pay a bill directly with a credit card. For the cost of the bill, these companies charge your credit card, and send a check for your invoice. To cover production expenses, they charge you an extra fee, and, of course, to make a profit.
Plastiq, which charges 2,85 percent for credit card payments, is the most popular intermediary operation.
The use of an intermediary is a last resort at best. Here’s why: Assume you’ve got a $500 credit payment due. An intermediary will charge $515 for your card, the amount of the payment plus a 3 percent fee, then send a check for $500 to your lender.
Your credit stays in good standing… You’re worse off than before, though:
- You didn’t minimize the debt. You’ve just relocated it to another venue.
- Probably, you’re in deeper debt. $20 was added to the overall commitments by the 4 percent premium.
- Debt is more costly. Interest rates are higher, generally much higher, on credit cards than on student loans. So the $500 worth of debt is going to cost you more to move forward.
Nerd tip: Even if a student loan servicer wanted to allow you to pay your bill directly with a credit card and tells you to pay student loans with credit card, the credit card processing costs would inevitably be passed along to you as a “convenience fee.”
Is it worth it for rewards?
Maybe in order to reap incentives, you are thinking of placing student loan payments on a credit card. If you’re going to spend $500 anyway, why not get it back with some points or cash? Naughty idea. Almost definitely, the transaction costs you will have to pay will outweigh the value of the incentives.
How about a 0% card?
With an introductory 0 percent APR period, placing the payment on a card would at least save you from having to pay interest in the short term. But you will also have to pay the fees for processing. And if by the end of the 0 percent duration, you can’t pay off the balance, you will be faced with skyrocketing finance charges.
In some very particular situations, with a balance transfer to a 0 percent bill, you may be able to save money by paying off the entire student loan. But if you’re financially in a tight spot and just trying to scrape a way together to pay the bill this month, this isn’t the avenue for you. It will be bad move to pay student loans with credit card.
What else can you do to pay students loans with a credit card?
Before finding a fast fix with a credit card, look at available relief solutions if you’re struggling to meet your student loan payments. Those possibilities include:
- With deferment or forbearance, putting payments (and possibly interest) on hold.
- Switching up to the government the student loan repayment plan.
- By refinancing your student loans, lowering your payments.