How to Refinance Student Loans With a 0% Credit Card Balance Transfer

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While repaying my student debt, I felt the pain of paying higher interest rates of over 6%. Most student loan borrowers feel that pain, too. The average student debt of $37,172 at a typical interest rate of 5% costs $155 a month in interest alone.

Unfortunately, I was unaware of options to refinance student loans. One strategy in particular could have been a smart fit: getting a zero-interest credit card and using it to perform a balance transfer to refinance my student loan. I could have used the 12-18 month introductory rate period to pay off my student loans, interest-free.

A credit card balance transfer for a student loan is possible and could be a smart move for you. However, it’s not as simple as transferring balances between credit cards. Follow this guide to perform a student loan balance transfer to a zero-interest credit card — and make sure you’re actually coming out ahead in the process.

How to transfer a student loan to a zero-interest credit card

Simply put, a balance transfer for a student loan uses funds provided by your credit card issuer to pay off your student debt.

However, the actual process can be a bit complicated. Here’s an overview of the steps involved in a student loan balance transfer.

1. Get the right zero-interest credit card

Overall, credit cards carry higher rates than most consumers pay on student loans. So a student loan balance transfer to a credit card only makes sense if you’re moving the debt to a credit card with a 0% introductory APR and paying off the balance before that intro period is up.

However, not every credit card issuer allows cardholders to perform balance transfers for student loans. According to WalletHub, the following credit card issuers allow student loan balance transfers:

  • Bank of America
  • Barclaycard
  • Capital One
  • Citi
  • Discover
  • PenFed
  • USAA
  • U.S. Bank
  • Wells Fargo
  • SunTrust Bank

Spend some time shopping and comparing credit cards to find one that offers both student loan balance transfers and 0% APRs for an introductory period. You should also look for cards that don’t have or will waive balance transfer fees. Once you find one you like, you can apply for the credit card. Upon approval, you’re ready for the next step.

2. Request a student loan balance transfer

The next step will be to use your new 0% credit card to pay off your student loan. Your credit limit might put a cap on how much you can borrow to use for a student loan balance transfer. To maximize savings, be strategic and target the student loan with the highest interest rate.

  1. Figure out the balance transfer amount you want to borrow and use to repay your student debt. Be ready with the balance transfer amount to request.
  2. Have student loan information on hand, such as your student loan servicer and account number. The credit card company might need this information to process the balance transfer and pay off your old loan.
  3. Next, reach out to your credit card issuer and verify their process for giving balance transfers for student loans. They can outline how to go about requesting a balance transfer and using it to pay off a student loan.
  4. Check with your student loan servicer make sure they will accept a check from your credit card company.  Depending on how your credit card issuer handles student loan balance transfers, they might pay out these funds directly to your student loan servicer; you’ll want to be sure they will process the payment from a credit card company.

In many cases, you will use a balance transfer check from your credit card issuer to complete the process. These work like normal checks, but instead of being tied to a bank account, they draw funds from your credit card account.

These funds are paid out to you or your student lender. Many credit card issuers can also complete this process online or by phone.

As you move forward in this process, make sure you’re not mixing up a cash advance with a balance transfer. The two offers can be worded similarly, but a cash advance often has higher fees and costs associated with it.

3. Use funds to repay student loans

After you request the balance transfer, the transaction will process and post. Make sure you get a receipt of payment from the student loan balance transfer to prove your student loan servicer got the funds.

Alternatively, the balance transfer funds might be deposited directly into your bank account. Try to immediately use these funds as a payment toward your student debt. Don’t let the money sit in your account, where you’ll only be tempted to spend it.

4. Repay your credit card balance before the 0% APR expires

Once the funds from your balance transfer have paid off your student debt, it’s time to repay your new credit card balance — and fast.

If you still have a balance after the 0% APR expires, you’ll likely face a higher rate than you had on your student loans. Credit card rates are typically around 15% APR or higher. Any savings you might have anticipated by having an interest-free card could quickly be undermined by new, higher interest charges.

Diligently pay extra on your credit card each month. And make sure you set it aside and don’t add new purchases to the balance, either.

Pros and cons of a student loan balance transfer

Now you know how to go about getting a credit card balance transfer for a student loan. But is this a smart move for you? Here are some potential benefits, drawbacks, and other considerations you should weigh before deciding.

Pros

Save on student loan interest

The most obvious benefit of a student loan balance transfer to a 0% APR credit card is the savings on interest. How much you could save will depend on the balance you want to transfer and how high your student loan rate is.

Maybe you have a $10,000 student loan at 6% APR that’s just entering repayment. Transferring the balance to a 0% credit card and paying it off in a year would save you $3,322 in interest, over a 10-year Standard Repayment Plan.

But what would you save if you paid off the loan in a year without the balance transfer? You’d still pay some interest — but not much. Paying the $937 a month it would take to pay off the $10,000 balance in a year, you’d pay $302 in interest (saving $3,021).

balance transfer student loan

When deciding whether you should do a student loan balance transfer to a credit card with 0% APR or prepay your student loan, the savings are there. But they might not be as steep as you’re expecting.

Keep yourself motivated to pay off debt

Another potential benefit of using a student loan balance transfer is that doing so can keep you motivated to quickly pay off a large chunk of student debt. The period that you have a 0% APR on the credit card is the only time you can repay the debt without incurring more interest fees.

With the expiration of your 0% rate looming, you have a deadline to work toward. This can keep you accountable and disciplined as you work toward repaying debt. Getting out of debt often comes down to changing behaviors, so this benefit can be powerful.

Cons

Balance transfer fee

You’ll also need to account for a balance transfer fee. Most credit cards will charge this fee, which is usually around 3 percent of the balance transfer amount.

Take the $10,000 student loan balance mentioned above. If your credit card charged a 3 percent balance transfer fee, you’d pay $300. That wipes out a big chunk of your savings.

Look for credit cards that don’t charge a balance transfer fee. For instance, the Barclaycard Ring has no balance transfer or annual fees. And it carries a 0% APR for the first 15 months for balance transfers made in the first 45 days.

If that’s not an option, you can always call your credit card issuer and ask them to waive or lessen the balance transfer fee.

Transferring a high balance can be risky

Transferring a high balance means you’re stuck sending huge payments each month if you want to beat the clock on your 0% introductory rate. This can quickly eat into your cash flow and might be more painful than you expect.

Additionally, you’ll need to qualify for a high enough credit limit to even use this strategy.

And even if you have, say, a $15,000 credit limit on your new card, you probably shouldn’t use it all up with a balance transfer. Borrowing too much against this limit could increase your credit utilization ratio too much, which might adversely affect your credit score.

If you want to pay off student loans with this strategy, make sure the balance transfer amount is 30 percent or less than your total credit limit. For instance, that would be about $5,000 of the $15,000 limit.

Consider student loan refinancing

With a student loan balance transfer, the 0% interest rate is a big draw. But it can also come with hassles like shopping for exactly the right credit card or coordinating with your student loan servicer. And you’ll have to force yourself to make big payments each month to stay ahead of the expiration date on the 0% APR.

There might be a better way to save on student loan interest: Refinancing your student loan with a private lender instead of a credit card.

The best student loan refinancing lenders offer rates as low as 1.95%. And you’re unlikely to face costs like a 3 percent balance transfer fee or a 15 percent interest rate hike after an introductory rate expires. You can also choose a longer repayment period to keep monthly payments affordable.

Use this student loan refinancing calculator to see how different interest rates and loan terms would affect your interest costs and monthly payments.

TL;DR: You can do a balance transfer for student loans, but it’s not always worth it

So, what’s the “too long; didn’t read” answer? Simply put, it is possible to transfer a balance from a student loan to a 0% credit card to save on interest.

However, there are some downsides to watch for. You’ll need to make sure both your credit card company and student loan servicer allow this transaction. You should also spend some time calculating the potential savings of having interest-free debt for the introductory period. And compare whether costs like balance transfer fees might offset savings.

Overall, if you take the time to find the right low-cost credit card and pay your balance in full before your 0% APR expires, you could come out ahead.

Interested in refinancing student loans?

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1 Important Disclosures for Earnest.

Earnest Disclosures

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.

Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.

The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at hello@earnest.com, or call 888-601-2801 for more information on ourstudent loan refinance product.

© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.


2 Important Disclosures for Laurel Road.

Laurel Road Disclosures

  1. VARIABLE APR – APR is subject to increase after consummation. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes.

3 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: Fixed rates from 3.899% APR to 8.179% APR (with AutoPay). Variable rates from 2.570% APR to 6.980% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. SoFi rate ranges are current as of September 14, 2018 and are subject to change without notice. See APR examples and terms. Lowest variable rate of 2.570% APR assumes the current index rate derived from the 1-month LIBOR of 2.08% plus 0.740% margin minus 0.25% AutoPay discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score.
  2. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

4 Important Disclosures for LendKey.

LendKey Disclosures

Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.


5 Important Disclosures for CommonBond.

CommonBond Disclosures

  1. Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). The following table displays the estimated monthly payment, total interest, and Annual Percentage Rates (APR) for a $10,000 loan. The Annual Percentage Rate (APR) shown for each in-school loan product reflects the accruing interest, the effect of one-time capitalization of interest at the end of a deferment period, a 2% origination fee, and the applicable Repayment Plan. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment, which is reflected in the interest rates and APRs displayed. Variable rates may increase after consummation. All variable rates are based on a 1-month LIBOR assumption of 2.08% effective July 25, 2018.

6 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Education Refinance Loan Rate DisclosureVariable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2018, the one-month LIBOR rate is 2.07%. Variable interest rates range from 2.57%-8.17% (2.57%-8.17% APR) and will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a cosigner. Fixed interest rates range from 3.75%-8.69% (3.75%-8.69% APR) based on applicable terms, level of degree earned and presence of a cosigner. Lowest rates shown require application with a cosigner, are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
  2. Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision at http://www.citizensbank.com/EdRefinance, including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
  3. Citizens Bank Education Refinance Loan Eligibility: Eligible applicants may not be currently enrolled, must be in repayment of their existing student loan(s) and must make the minimum number of payments after leaving school. Primary borrowers must be a U.S. citizen, permanent resident or resident alien with a valid U.S. Social Security Number residing in the United States. Resident aliens must apply with a co-signer who is a U.S. citizen or permanent resident. The co-signer (if applicable) must be a U.S. citizen or permanent resident with a valid U.S. Social Security Number residing in the United States. For applicants who have not attained the age of majority in their state of residence, a co-signer will be required. Citizens Bank reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Education Refinance Loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, certification of borrower’s student loan amount(s) and highest degree earned.
  4. Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  5. Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
  6. Co-signer Release: Borrowers may apply for co-signer release after making 36 consecutive on-time payments of principal and interest. For the purpose of the application for co-signer release, on-time payments are defined as payments received within 15 days of the due date. Interest only payments do not qualify. The borrower must meet certain credit and eligibility guidelines when applying for the co-signer release. Borrowers must complete an application for release and provide income verification documents as part of the review. Borrowers who use deferment or forbearance will need to make 36 consecutive on-time payments after reentering repayment to qualify for release. The borrower applying for co-signer release must be a U.S. citizen or permanent resident. If an application for co-signer release is denied, the borrower may not reapply for co-signer release until at least one year from the date the application for co-signer release was received. Terms and conditions apply.
  7. Estimated average savings amount is based on 14,659 Education Refinance Loan customers who saved on loans between August 1, 2017 and July 31, 2018. The calculation is derived by averaging monthly savings across Education Refinance Loan customers whose payment amounts decreased after refinancing, calculated by taking the monthly payment prior to refinancing minus the monthly payment after refinancing. We excluded monthly savings from customers that exceeded $4,375 and were lower than $20 to minimize risk of data error skewing the savings amounts. Savings will vary based on interest rates, balances and remaining repayment term of loans to be refinanced. Borrower’s overall repayment amount may be higher than the loans they are refinancing even if monthly payments are lower.

2.57% – 6.98%3Undergrad
& Graduate
Visit SoFi
2.47% – 5.87%1Undergrad
& Graduate
Visit Earnest
2.47% – 8.03%4Undergrad
& Graduate
Visit Lendkey
2.80% – 6.22%2Undergrad
& Graduate
Visit Laurel Road
2.48% – 6.25%5Undergrad
& Graduate
Visit CommonBond
2.57% – 8.17%6Undergrad
& Graduate
Visit Citizens
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.