Nowadays, nearly two-thirds of college students graduate with student loan debt, with the average debt load approaching $50,000 as of 2018. Millions of people are diligently paying off those loans, but even the most responsible borrowers can find themselves in a pinch — a job loss, a debilitating medical condition or another emergency that leaves them unable to make their monthly payment.
In such situations, can you put a student loan payment on a credit card? Not directly.
In general, student loan servicers do not accept credit cards. For one thing, federal regulations generally prohibit it. Further, every credit card transaction involves processing fees that are paid by the party that accepts the card as payment. Lenders certainly aren't going to pay those fees the way stores do. (Stores can accommodate credit card fees by factoring them into their prices, like any other cost of doing business.)
» MORE: Can you pay a loan with a credit card?
When you can't pay a bill directly with a credit card, one option is to use an intermediary service. These companies charge your credit card for the amount of the bill, then send a check for your payment. They charge you an additional fee to cover processing costs — and, of course, to make a profit.
The most prominent intermediary service is Plastiq, which charges 2.9% for credit card payments.
Using an intermediary is at best a last resort. Here's why: Say you have a $500 loan payment due. An intermediary might charge your card $515 — the amount of the payment plus a 3% fee — then send a check to your lender for $500.
Your loan remains in good standing ... but you're worse off than before:
You haven't reduced your debt. You've just moved it to a different place.
You're actually deeper in debt. The 3% fee added $15 to your total obligations.
The debt is more expensive. Interest rates on credit cards are higher — typically much higher — than on student loans. So that $500 worth of debt will cost you more to carry going forward.
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Even if a student loan servicer decided to let you pay your bill directly with a credit card, it would undoubtedly pass the credit card processing costs along to you as a "convenience fee."
Is it worth it for rewards?
Maybe you're thinking of putting student loan payments on a credit card in order to reap rewards. If you're going to be spending the $500 anyway, why not get some points or cash back on it? Bad idea. The processing fees you'll have to pay will almost certainly offset the value of the rewards.
How about a 0% card?
Putting the payment on a card with an introductory 0% APR period would at least spare you from having to pay interest in the short term. But you'd still have to pay the processing fees. And if you can't pay off the balance by the end of the 0% period, you'll be faced with skyrocketing finance charges.
In some very specific circumstances, you might be able to save money by paying off your entire student loan with a balance transfer to a 0% card. But if you're in a tight spot financially and just trying to scrape together a way to pay this month's bill, this isn't the avenue for you.
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Alternatives to paying your student loan with a credit card
If you’re thinking of using a credit card to pay off your student loans, it might be because you don’t have cash on hand. But there are better options:
Enroll in an income-driven repayment plan. If your federal student payments are more than you can manage, contact your servicer about enrolling in an income-driven repayment plan. These plans will cap payments at a portion of your discretionary income — if you’re unemployed, your payment will be $0. It also extends the length of repayment to 20 or 25 years. When you hit the end, your remaining loan balance is forgiven.
Request a deferment or forbearance. Ask your federal student loan servicer or private student lender to take a payment pause. Federal loans are eligible for unemployment deferment or a loan forbearance if you need a break from payments. Most private lenders offer opportunities for pausing or temporarily lowering payments due to financial hardship. During any pause, interest will accrue on your loan, which will increase the total you owe when you start repayment.
» MORE:Deferment vs. forbearance: Which is right for your student loans?
Unfortunately, most loan types prohibit you from making a payment directly with a credit card. Yes, there are some workarounds, but higher interest rates, processing fees and potential risk factors generally make those methods inadvisable.
Paying student loans with a credit card generally isn't possible directly, and using a workaround like a third-party bill pay service or balance transfer can be costly and complicated.
If your lender allows it and you are given enough of a credit limit, you may be able to pay a portion of your entire balance of your home, car or student loans with a credit card. Federal student loan issuers, however, are restricted by the Department of Treasury from accepting credit card payments.
Many card issuers allow you to transfer personal loans, as well as auto, home equity loans and student loan debt, too. Doing so could help you save thousands of dollars in interest.
There are bills you can't typically pay with a credit card, like mortgage, student loan, and auto loan payments. But there are ways to utilize your credit card to pay these and other expenses. Some credit cards allow you to take a cash advance, where you borrow cash against your credit limit.
While it's possible to pay a loan with a credit card, it will almost always cost you to do so. That cost usually comes in the form of transaction fees and higher interest rates.
Generally, you can pay your mortgage loan with a credit card, but it's not as simple as paying your mortgage lender directly through your credit card company. Most mortgage lenders won't accept mortgage payments from a credit card because they would be required to pay transaction fees.
“You can use a credit card to pay off a personal loan,” advised personal finance writer and credit card expert Ben Luthi. “Some credit card issuers will allow you to do it directly through your online account like any other balance transfer.
No, you cannot use a credit card to pay other credit card bills. However, credit cards often have options like cash advance or balance transfer that give you access to "cash" funds. If you are short on money to pay your bills, you can use these funds to pay off your balance.
Some card issuing banks offer customers the option of paying their bills in EMIs (equated monthly installments). The EMI option is applicable on selected purchases or your total outstanding. Some banks may even call you soon after a large transaction offering the EMI option.
It's not possible to pay off federal student loans with a credit card, but you may be able to use credit to pay your private student loans. Using a credit card to pay off your student loan debt has both benefits and drawbacks.
The good news is that many different types of debts can be transferred to your credit card. A personal loan balance transfer can be done, along with auto loans, student loans and even other credit cards. The tricky part is that which types of debts can be transferred vary by issuer.
assuming your lender will let you do it. Here's the thing: Most lenders won't let you do it because the credit card companies impose a fee of up to 3.5% for every transaction they process. In other words, it generally costs your lender about $12.25 of your monthly payment when you use a credit card.
Information about your student loans is reported to the four nationwide consumer reporting agencies. Based on the information provided, each individual consumer reporting agency uses their own unique scoring model to determine your FICO credit score.
Knowing what income you shouldn't include in your application is as important as knowing which you should. In this sense, you should avoid reporting:Borrowed money such as your student loan. Although money is technically coming into your account, it's debt, not income.
Is student loan interest deductible? Student loan interest is deductible if your modified adjusted gross income, or MAGI, is less than $70,000 ($145,000 if filing jointly). If your MAGI was between $70,000 and $85,000 ($175,000 if filing jointly), you can deduct less than than the maximum $2,500.
Depending on what your college or university bursar's office allows, you may be able to pay your tuition with a credit card. While you can get enhanced flexibility and may even earn rewards points by paying tuition with credit, you will likely have to pay fees and could end up spending much more on interest.
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