Douglas Olsen
Student loans are a significant burden for many, especially in the United States, where federal and private student loan debt totaled a staggering $1.757 trillion in 2023. While it is rare to use a credit card to pay student loan lenders directly, some workarounds and credit card rewards programs can help you earn rewards or cash back to supplement your student loan payments. However, it's important to carefully consider the fees and interest rates associated with these strategies to ensure the benefits outweigh the costs.
| Characteristics | Values |
|---|---|
| Can you pay student loans with a credit card? | Yes, but not directly. |
| Are there credit cards that offer rewards for student loan payments? | Yes, but they are rare. |
| How do credit card rewards for student loan payments work? | You can earn cash back or points, which you can redeem as cash or direct deposit, and then use for student loan payments. |
| What are some examples of credit cards that offer rewards for student loan payments? | Bank of America Premium Rewards Credit Card, SoFi Credit Card, Upromise Mastercard, CollegeCounts 529 Rewards Card, Capital One Venture Rewards Credit Card, Laurel Road Student Loan Cashback Credit Card |
| Are there any fees associated with paying student loans with a credit card? | Yes, there may be fees that could outweigh the benefits or rewards. |
| What are some alternatives to paying student loans directly with a credit card? | Using a third-party processor like PayPal, Plastiq, Square, or Stripe. Using a third-party service to pay student loans with a credit card. |
| What are some considerations when using a credit card to pay student loans? | Ensure that the transaction posts as a purchase and not a cash advance. Make sure the value of the rewards is greater than the fees. |
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What You'll Learn
Rewards programs for student housing payments
As of 2023, federal and private student loan debt in the United States totaled $1.757 trillion, with the average student loan debt balance estimated to be as high as $40,114. Many student loan servicers do not accept credit card payments, although some do in certain instances. If you are able to pay by credit card, it is important to ensure that your payment posts as a purchase rather than a cash advance, which can be more costly. Some credit cards now offer a bonus if you redeem rewards to pay your student loan bills.
One example of a credit card that offers rewards for student loan payments is the SoFi Credit Card, which offers a rate of up to 3% cash back for a year when you set up a direct deposit with SoFi. After that, you can earn 2% cash back redeemable toward paying down SoFi student loans. The SoFi Unlimited 2% Credit Card earns an unlimited 2% back on most purchases, and these points can be redeemed for cash that can be applied to the balance on a SoFi student loan refinance.
Another option is the Laurel Road Student Loan Cashback Credit Card, which allows users to redeem their cash back for 2% when they use it toward student loans. Capital One is another credit card company that will allow you to transfer student loan debts to their cards.
In addition to these credit card rewards programs, there are also rewards programs specifically for student housing payments. For example, Bilt Rewards has partnered with American Campus Communities (ACC), the nation's leading student housing company, to allow students aged 18 and older to earn rewards on their student housing payments. Bilt Points can be earned on every rent payment and can be redeemed for travel, fitness classes, home decor, and rent credits, in addition to eligible student loan payments.
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Credit card payments for private student loans
Although it is possible to pay off private student loans with a credit card, it is generally not recommended. Student loan interest rates are usually lower than credit card interest rates, so if you are unable to make your student loan payments on time, it is better to incur a late payment fee with the student loan company than to accrue interest on a credit card.
If you are able to pay your credit card bill in full and on time every month, you may be able to take advantage of credit card rewards to help pay down your student loan debt. Some credit cards offer bonus cash back or points when you redeem your rewards for student loan payments. For example, the SoFi Credit Card offers up to 3% cash back for a year when you set up a direct deposit, and then 2% cash back redeemable toward paying down SoFi student loans. The Laurel Road Student Loan Cashback Credit Card allows users to redeem their cash back for 2% when they use it toward student loans. The Bank of America Premium Rewards credit card earns 1.5 points per dollar spent, and if you're a Bank of America Premium Rewards member, you'll earn 25%-75% more bonus points, meaning your student loan payments could earn you up to 2.62 points per dollar spent. The Chase Freedom Unlimited card earns 5% cash back on travel booked through Chase Travel, 3% back at drugstores and on dining at restaurants, and 1.5% back on all other purchases.
However, it is important to note that many student loan servicers do not accept credit card payments directly. You may have to write a convenience check from your credit card balance or use a third-party platform like Plastiq, PayPal, Square, or Stripe. These methods usually come with high fees, and you may not have access to the same credit card rewards as with a direct payment.
Overall, while it is possible to use credit cards to earn rewards for private student loan payments, it is important to carefully consider the risks and ensure that you are able to make your credit card payments in full and on time to avoid accruing additional debt.
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Third-party services to pay student loans
Third-party services can help pay off student loans in various ways. Some companies have implemented programs to help pay off student loan debt to attract and retain employees. For example, Google offers full-time employees a matching student loan repayment benefit of up to $2,500 per year, while New York Life provides company contributions of up to $170 per month towards employee student loans, with a $10,200 lifetime maximum after five years.
Clayco offers a unique plan where they pay $100 per month towards an employee's student loans for the first year, increasing the payment by $50 each year, up to $250 per month in the fourth year. Additionally, employees can opt to direct their 401(k) contribution towards their student loan debt, and Clayco will continue matching it. Financial services company Fidelity provides employees with a student loan repayment benefit of up to $15,000 for full-time workers and $7,500 for those working 20 to 30 hours per week.
Visual technology company Nvidia assists recent graduates with up to $350 per month in student loan repayment, with a lifetime maximum of $30,000. RTX, an aerospace and defence company, contributes to employees' 401(k) plans, matching their student loan payments up to a certain amount.
These third-party services provide valuable assistance to employees burdened with student loan debt, helping them achieve financial stability and a more secure future.
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Rewards cards for student loan payments
Although it is rare, there are a few credit cards that offer bonus cash back or other rewards for student loan payments. However, it is important to note that you cannot pay your student loans with a credit card directly, and there may be fees associated with using a credit card for student loan payments that could outweigh the benefits.
If you have a student loan servicer that accepts credit card payments without an additional fee, you can benefit from rewards cards. Some credit cards offer cash back or points, which you can redeem as cash or direct deposit and then use for your student loan payments. Others offer bonus cash back specifically for student loan payments. For example, the SoFi Credit Card offers up to 3% cash back for a year when you set up a direct deposit with SoFi, and then 2% cash back redeemable toward paying down SoFi student loans. The Laurel Road Student Loan Cashback Credit Card also allows users to redeem their cash back for 2% when they use it toward student loans.
Third-party services like PayPal, Plastiq, Square, or Stripe can also be used to make student loan payments with a credit card. However, these companies may charge a fee for their services, so it is important to calculate whether the rewards earned will be valuable enough to offset the additional fee.
When choosing a rewards card for student loan payments, look for a card with a large welcome bonus and a high rewards rate, such as 1.5% or 2%, on all purchases. For example, the Bank of America Premium Rewards credit card earns 1.5 points per dollar spent, and if you're a Bank of America Premium Rewards member, you can earn up to 2.62 points per dollar spent on student loan payments.
It is important to remember that using a credit card to pay student loans is best when you have the means to pay off your loan and simply want to take advantage of the rewards. If you are unable to pay your credit card bill in full and on time every month, it may be better to stick to the usual method of paying student loans with cash or check.
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Cashback cards for student loan payments
While it is rare, there are a few credit cards that offer bonus cashback rewards for student loan payments. These cards can be a great tool to help you reduce your student loan balance quicker. However, it's important to remember that credit card rewards are not a sustainable solution for funding years of education and should only be used as a supplementary method.
One example of a cashback card for student loan payments is the Laurel Road Student Loan Cashback Credit Card. This card offers 2% cashback on eligible student loan payments and 1% cashback on everything else. New cardholders can also earn a $300 bonus towards student loan payments after spending $3,000 within the first 90 days.
Another option is the SoFi Unlimited 2% Credit Card, which offers an unlimited 2% cashback on most purchases. The cashback can be redeemed for cash and applied to the balance of a SoFi student loan refinance. Additionally, the SoFi Credit Card offers up to 3% cashback for a year when you set up a direct deposit with SoFi.
It's important to note that some student loan servicers do not accept credit card payments, and even if they do, you should ensure that your payment posts as a purchase rather than a cash advance to avoid additional fees. Additionally, using a credit card to pay your student loans is best when you have the means to pay off your loan and want to get out of debt quickly. If you are unable to pay your credit card bill on time, it may be better to stick to the traditional methods of paying your student loans.
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Frequently asked questions
Yes, you can get rewards for paying student loans with a credit card. However, many student loan servicers do not accept credit card payments directly. You can use a third-party processor like PayPal, Plastiq, Square, or Stripe, but you may be charged a fee for their services.
Some credit cards that offer rewards for paying student loans include the Bank of America Premium Rewards credit card, the SoFi Unlimited 2% Credit Card, the Upromise Mastercard, and the CollegeCounts 529 Rewards card.
Before using a credit card to pay off student loans, consider whether the rewards you'll earn are valuable enough to offset any additional fees. Also, make sure you can pay your credit card bill in full and on time every month to avoid incurring interest or late fees.
