Making student loan payments with a credit card can be tempting. After all, if your credit card offers you rewards like points or miles, by putting your student loan payments on your card, you could be cashing in on points and scoring a free flight to Vegas, right?
On the flip side, you might be looking for a way to make your monthly student loan payment during a month when your checking account isn’t quite as full as you’d like.
So is it even possible to pay down your student loans with a credit card? The short answer is yes, but make sure you have all the information.
Can I Make a Student Loan Payment With My Credit Card?
Paying your student loans with many credit cards can be more complicated than charging dinner with your favorite food-delivery app.
Federal student loan servicers as a rule do not allow credit card payments directly. Payments have to go through a third-party platform, for a fee. If private student loan companies allow credit card payments, they may also charge a transaction fee.
Unfortunately for phone-hating millennials, the best way to make a student loan payment with your credit card is to call your student loan servicer and ask if it’s an option. Some allow credit card payments in certain situations, such as if it’s the last day before your payment becomes overdue.
And then there are credit cards that welcome payments on certain student loans. Stay tuned.
Is Using a Credit Card to Pay on a Student Loan a Good Idea?
Even if your student loan servicer accepts credit card payments, the practice could have downsides.
First of all, your credit card likely has a higher interest rate than your student loans. In other words, you might end up paying even more interest on your loans by using your credit card.
So while racking up those credit card points can seem enticing, they might not be such a great deal if you’re paying more on your student loans in the long run.
You might want to also consider your credit score. Your credit usage makes up 30% of your FICO® score. Typically, you don’t want to use more than a third of the credit available to you. If you put a large student loan payment on your credit card, you might use a bigger chunk of your available credit, bringing down your credit score.
On top of the credit risks, if you’re unable to keep up with your student loans, using a credit card to pay them down could land you with student loan and credit card debt.
Is There a Better Way to Manage Student Loan Debt?
If you feel like you’re going to fall behind on student loan payments, using a credit card isn’t your only option.
If you have federal student loans, income-driven repayment plans are intended to make payments more affordable.
A Direct Consolidation Loan could lower your monthly payment by giving you up to 30 years to repay your federal student loans.
If you’re not able to make your monthly payments, you could ask your loan servicer about forbearance or deferment, both of which pause payments until your financial situation improves. (Of course in 2020-21, there was an extended period of government forbearance, when payments and interest were waived.)
You could also consider refinancing your student loans with a private lender. Refinancing consolidates student loans into a new loan, one ideally with a lower interest rate and a more favorable loan term.
Can you make student loan payments with a credit card? Yes, either in a roundabout way or directly. Should you? It just depends. Being informed about the pros and cons is key.
Here’s a pro: The SoFi credit card allows you to earn 2% unlimited cash back when you redeem* points toward a SoFi student loan refinance balance.
*See Rewards Details SoFi.com/card/rewards.
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