Can You Pay Your Student Loans With a Credit Card?

can you pay student loans with a credit card

As a student loan borrower, you’ve probably felt the pinch of those monthly payments and wondered if there’s a better way to deal with your student loans.

Whether you’re having trouble making payments or simply want to redeem rewards, you may have wondered, “Can you pay student loans with a credit card?”

The answer? It depends. Read on to learn more about if you can pay student loans with a credit card and what to consider before you go down that route.

Can You Pay Student Loans with a Credit Card?

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.

I remember when I got my first rewards credit card and I thought it would be a brilliant idea to make my hefty monthly payments on my credit card and rack up miles.

But alas, Nelnet does not allow borrowers to pay student loans with a credit card. I was bummed to say the least, as I thought I might be able to score a free flight or some cash back while paying off my massive student loans.

Loan servicers like Nelnet, MOHELA and FedLoanServicing require borrowers to pay through their checking or savings account.

Great Lakes also mentions in their FAQ section that they don’t accept credit card payments, except for loans in default. However, some borrowers have claimed they were able to make a one-time payment using a credit card by calling Great Lakes and making a payment over the phone.

Private student loan borrowers may be able to pay student loans with a credit card, but might have to pay a fee to do so.

Dangers of Using a Credit Card to Pay Student Loans

Keep in mind that just because you can pay your student loans with a credit card doesn’t mean you should. In fact, there are plenty of reasons not to do it.

First, it’s crucial to consider fees that may be tacked on if you pay with a credit card.

Also note that credit cards have much higher interest rates than student loans. Federal student loan interest rates are typically between around 4.00% to 7.00%, whereas credit card interest rates average around 15.00%.

Even if you wanted to use an introductory 0% APR credit card offer to save money on interest, that rate would only be available for a limited time. Once the promotional rate is up, the interest rate could be double your student loan interest rate.

And the worst part: because your student loan payment already includes interest charges for the month, carrying a balance on your credit card and paying interest on it means you are paying interest on interest!

Using a credit card to make student loan payments can also have other consequences that aren’t so obvious.

For instance, the amount of debt you owe in relation to available credit makes up 30 percent of your FICO credit score. This number is also known as your credit utilization ratio.

Even if you pay off your credit cards in full each month, your credit could be at risk if your ratio is high at the time they’re reviewed each month.

That’s because using all of your available credit is seen as a red flag to lenders. Typically, experts recommend using less than 30 percent of your credit limit. So if you have a $10,000 credit limit, it’s best to keep your balances below $3,000.

Another thing to consider is that you once you make student loan payments with your credit card, you can’t reverse the process.

When you’re struggling to make payments on your student loans, you can typically be granted deferment or forbearance. However, using a credit card to keep up on payments instead means if you hit troubled times, you could be in credit card debt and student loan debt. Not good.

So is it ever a good idea to use a credit card to make student loan payments?

“If you are able to use your credit card to make student loan payments, then it only makes sense to do so in order to earn rewards,” explained Jason Steele, Credit Card Expert at CompareCards.com.

“And even then, it’s possible that some student loan servicers will add additional fees that will outweigh the value of any rewards returned. On the other hand, it’s not a good idea to use a credit card unless you will avoid interest by paying off your balance in full each month,” he advised.

Bottom Line

Many student loan borrowers can’t pay student loans with a credit card, but for borrowers who are allowed this option, seriously consider the ramifications on your wallet and credit score before moving forward.

In general, paying student loans with a credit card should be avoided. Instead, exhaust other options first such as an income-driven plan, loan forgiveness, or refinancing.

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