Earning credit card rewards can lead to flights, hotel stays and more. But did you know that credit card rewards can help you pay back your student loans?
Is there a best credit card to pay off student loans? We’ll break down some ways you can use credit card rewards to pay down your student loans.
Find a credit card to maximize financial rewards
Redeem points toward student loan payments
Consider a credit card with a 0% introductory APR
6 credit card do’s and don’ts
Credit cards and student loans: Final word
You can use a credit card for payments you’re already making every month, whether it’s rent, gas or groceries. But this is only a good idea if you can pay back your balance in full each month.
If you’re planning this, it may make sense to consider a rewards card. It’s important to note that rewards cards may have annual fees and are usually reserved for cardholders with good credit. That being said, they come with perks like miles, cash back and points.
If you have some bucket list trips planned, a rewards credit card that incentivizes travel can help you get free flights. Then, you could put the money you would have spent on the trip toward your student loan payments.
For example, the Chase Sapphire Preferred® Card lets you Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $750 toward travel when you redeem through Chase Ultimate Rewards®
If you’re already spending that cash on monthly bills, it may make sense to put your bills on this card and reap the rewards. Or, you may get a credit card with gas rewards to help minimize the amount you spend on commuting. The point: Focus on how you spend your money now, then look for credit card rewards that fit your habits.
In the past, some credit cards allowed cardholders to link their credit card rewards to their student loan account. While there are no credit cards that currently offer this, you could earmark cashback rewards to pay down your student loans.
For example, Citi allows ThankYou points to be converted into a check to pay your student loan servicer. In this system, 1 point is equivalent to 1 cent. A card like the Citi Rewards+℠ Card rounds up to the nearest 10 points on every purchase, while you can earn 2X ThankYou® Points at Supermarkets and Gas Stations for the first $6,000 per year and then 1X Points thereafter. Plus, earn 1X Points on All Other Purchases.
So, for example, 2,500 points translates to $25 to pay off your student loans.
If you use this option, your student loan payment would be mailed to your loan servicer, so it’s important to see if it accepts third-party checks and find out if there’s a special mailing address.
Of course, you can follow a similar strategy with other cashback rewards credit cards and send the additional check yourself. For example, say you get 1% back on all your purchases. Typically, when you redeem your rewards, you can opt for a statement credit, check or other form of payment. Rather than taking a statement credit, you could ask for a check to put that money toward your student loans to pay down the principal more quickly.
While you may not be able to charge monthly student loan payments to a credit card, it may be possible to get a credit card with a 0% introductory APR and request a balance transfer to move the balance of your student loans to a credit card.
Of course, once you do this, the debt is no longer a student loan, and you need to remember the key word in all this: Introductory.
Some people could benefit from this approach, including those with excellent credit who have access to competitive 0% APR introductory offers. But these 0% rates are temporary, and student loan interest rates are usually lower than typical credit card interest rates.
In other words, if you have an 18-month 0% APR offer, you better plan to pay off the balance in full before the 18 months is up. For example, maybe you got a higher-paying job, are only a year out from paying your loans in full or are receiving financial support to finish paying your student loans from relatives.
If you don’t have a plan in place, it would be better to focus on other strategies that can help you maximize rewards by paying off your credit cards.
If you were wondering how to pay student loans with a credit card, you’ve learned it’s not typically possible. But to effectively use credit card rewards to pay off student loans, it’s important to be strategic. Here are some do’s — and don’ts — to follow.
Do pay your credit card bill in full each month. The interest rates on reward cards can be high, and rewards are mitigated if you carry a balance. Make sure you have a plan in place to pay the bill in full, and don’t use the credit card for just-because purchases.
Don’t ignore fees for credit card payments. Some vendors, such as an apartment management company, may charge a fee for credit card payments. If yours does, you should consider whether it’s worth using your card. For example, let’s say you have a credit card that offers 2% cash back but your vendor charges a 3% fee for credit card payments. You will still pay more if you pay by credit card than you would if you stuck to other payment methods. That said, if a vendor doesn’t charge a fee, it may make sense to automate monthly payments so they are automatically covered by the credit card that offers the highest reward options.
Do pay attention to your credit score. Reward credit cards tend to be approved for people who have good to excellent credit. If your credit score is lower than that, it may make sense to work on improving your score before applying for the card.
Don’t overlook interest rates or APRs. Yes, you are going to pay your balance in full, each and every month (right?). But, sometimes, life happens. A balance that rolls from month to month may make your student loan bill even higher than you intended. Stick to a card with a low APR and pay attention to your interest rate, since this could change over time.
Do assess annual fees. Annual fees for reward credit cards may cost several hundred dollars. Are they worth it? That depends. If you’re only planning to use the card occasionally, the rewards may not be worth the fee. But if you’re going to use the card each and every month to pay your student loans, it’s worth doing the math to see how much the rewards will equal in dollars to ensure the card pays off in the long run.
Do stick to a plan. Reward credit cards may help you achieve your goal of paying off your student loans more quickly than expected, but only if they are used smartly. Again, consider automating your credit card payments so that the balance is always paid in full.
Using credit card rewards to pay student loans can be a strategic way to make a dent in your payments and earn money from things you would spend money on anyway.
For this strategy to work, the key is to make sure you don’t end up overspending in pursuit of credit card rewards, which obviously defeats the purpose.
Be sure to read any fine print about spending requirements and ensure that you pay off your balances in full each month. If used responsibly, credit card rewards can help you pay off student loans that much faster.
The information related to the Chase Sapphire Preferred® Card and the Citi Rewards+℠ Card has independently been collected by Student Loan Hero and has not been reviewed or provided by the issuer of this card prior to publication.
Melanie Lockert contributed to this article.
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
|1.99% – 6.65%1||Undergrad & Graduate|
|1.99% – 7.10%2||Undergrad & Graduate|
|2.99% – 6.44%3||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|1.99% – 6.43%4||Undergrad & Graduate|
|3.19% – 6.08%5||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. Mortgage lending is not offered in Puerto Rico. All loans are provided by KeyBank National Association.
ANNUAL PERCENTAGE RATE (“APR”)
There are no origination fees or prepayment penalties associated with the loan. Lender may assess a late fee if any part of a payment is not received within 15 days of the payment due date. Any late fee assessed shall not exceed 5% of the late payment or $28, whichever is less. A borrower may be charged $20 for any payment (including a check or an electronic payment) that is returned unpaid due to non-sufficient funds (NSF) or a closed account.
For bachelor’s degrees and higher, up to 100% of outstanding private and federal student loans (minimum $5,000) are eligible for refinancing. If you are refinancing greater than $300,000 in student loan debt, Lender may refinance the loans into 2 or more new loans.
ELIGIBILITY & ELIGIBLE LOANS
Borrower, and Co-signer if applicable, must be a U.S. Citizen or Permanent Resident with a valid I-551 card (which must show a minimum of 10 years between “Resident Since” date and “Card Expires” date or has no expiration date); state that they are of at least borrowing age in the state of residence at the time of application; and meet Lender underwriting criteria (including, for example, employment, debt-to-income, disposable income, and credit history requirements).
Graduates may refinance any unsubsidized or subsidized Federal or private student loan that was used exclusively for qualified higher education expenses (as defined in 26 USC Section 221) at an accredited U.S. undergraduate or graduate school. Any federal loans refinanced with Lender are private loans and do not have the same repayment options that federal loan program offers such as Income Based Repayment or Income Contingent Repayment.
All loans must be in grace or repayment status and cannot be in default. Borrower must have graduated or be enrolled in good standing in the final term preceding graduation from an accredited Title IV U.S. school and must be employed, or have an eligible offer of employment. Parents looking to refinance loans taken out on behalf of a child should refer to https://www.laurelroad.com/refinance-student-loans/refinance-parent-plus-loans/ for applicable terms and conditions.
For Associates Degrees: Only associates degrees earned in one of the following are eligible for refinancing: Cardiovascular Technologist (CVT); Dental Hygiene; Diagnostic Medical Sonography; EMT/Paramedics; Nuclear Technician; Nursing; Occupational Therapy Assistant; Pharmacy Technician; Physical Therapy Assistant; Radiation Therapy; Radiologic/MRI Technologist; Respiratory Therapy; or Surgical Technologist. To refinance an Associates degree, a borrower must also either be currently enrolled and in the final term of an associate degree program at a Title IV eligible school with an offer of employment in the same field in which they will receive an eligible associate degree OR have graduated from a school that is Title IV eligible with an eligible associate and have been employed, for a minimum of 12 months, in the same field of study of the associate degree earned.
The interest rate you are offered will depend on your credit profile, income, and total debt payments as well as your choice of fixed or variable and choice of term. For applicants who are currently medical or dental residents, your rate offer may also vary depending on whether you have secured employment for after residency.
The repayment of any refinanced student loan will commence (1) immediately after disbursement by us, or (2) after any grace or in-school deferment period, existing prior to refinancing and/or consolidation with us, has expired.
POSTPONING OR REDUCING PAYMENTS
After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship.
We may agree under certain circumstances to allow a borrower to make $100/month payments for a period of time immediately after loan disbursement if the borrower is employed full-time as an intern, resident, or similar postgraduate trainee at the time of loan disbursement. These payments may not be enough to cover all of the interest that accrues on the loan. Unpaid accrued interest will be added to your loan and monthly payments of principal and interest will begin when the post-graduate training program ends.
We may agree under certain circumstances to allow postponement (deferral) of monthly payments of principal and interest for a period of time immediately following loan disbursement (not to exceed 6 months after the borrower’s graduation with an eligible degree), if the borrower is an eligible student in the borrower’s final term at the time of loan disbursement or graduated less than 6 months before loan disbursement, and has accepted an offer of (or has already begun) full-time employment.
If Lender agrees (in its sole discretion) to postpone or reduce any monthly payment(s) for a period of time, interest on the loan will continue to accrue for each day principal is owed. Although the borrower might not be required to make payments during such a period, the borrower may continue to make payments during such a period. Making payments, or paying some of the interest, will reduce the total amount that will be required to be paid over the life of the loan. Interest not paid during any period when Lender has agreed to postpone or reduce any monthly payment will be added to the principal balance through capitalization (compounding) at the end of such a period, one month before the borrower is required to resume making regular monthly payments.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of June 23, 2020 and is subject to change.
2 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.
The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.
You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 1, 2020.
Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 6.21% per year for a 5-year term, 3.40% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.89% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 4.20% per year to 7.05% per year for a 15-year term, or 4.51% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan).
Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.99% (with autopay) to 7.10% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is 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 April 27, 2020, the one-month LIBOR rate is 0.43763%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.01% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.09% per year to 3.92% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.67% per year to 4.56% per year for a 12-year term, 3.44% per year to 6.65% per year for a 15-year term, 4.75% per year to 6.93% per year for a 20-year term, or 5.14% per year to 7.10% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates 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 co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. These rates are 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.
3 Important Disclosures for SoFi.
4 Important Disclosures for Earnest.
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 3.19% APR (with Auto Pay) to 6.43% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 6.43% 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 June 15, 2020, 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 6/15/2020. 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 [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 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.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.2% effective May 10, 2020.