Janice Lozano
It is not possible to pay off federal student loans with a credit card directly, but you may be able to use credit to pay your private student loans. Navient, a student loan servicer, allows payments through debit cards or credit cards over the phone with a surcharge. However, there are other ways to pay off student loans with a credit card, such as using a third-party payment service or convenience checks, although these methods can be expensive and may not be worth the effort.
| Characteristics | Values |
|---|---|
| Possibility of paying Navient student loan with a credit card | Yes, but not directly. It is possible to pay Navient student loans with a credit card through a third-party payment service or convenience checks. |
| Fees | Third-party payment services charge fees, typically ranging from 2.5% to 3%. These fees can outweigh the benefits of using a credit card, such as rewards or cash back. |
| Interest rates | Credit card interest rates are typically higher than student loan interest rates, which can increase the overall cost of the loan. |
| Benefits | Using a credit card can offer benefits such as rewards, taking advantage of a 0% APR offer, or making timely student loan payments. |
| Drawbacks | In addition to fees, using a credit card can lead to higher debt and losing federal protections associated with student loans. It may also not be accepted by all loan servicers. |
| Alternatives | Alternatives to paying with a credit card include debit cards, bank transfers, or a special repayment plan negotiated with the lender. |
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What You'll Learn
Navient loan surcharge
Navient is a student loan servicer that allows payments via credit card, but only over the phone and with a surcharge. The surcharge is a flat fee of $14.95. While this surcharge is not overwhelming, it can be cumbersome to pay by phone and not ideal to pay a surcharge every month.
There are a few alternatives to paying the Navient loan surcharge. One option is to use a third-party provider or intermediary service, such as Plastiq, which charges a 2.9% fee for credit card payments. Another option is to use a convenience check from your credit card issuer, but this typically comes with a cash advance fee of 3% to 5% and starts accruing interest immediately. A balance transfer to pay your loan is another possibility, but this also usually comes with a 3% to 5% fee.
It is worth noting that federal regulations generally prohibit paying student loans directly with a credit card, and credit card transactions involve processing fees that lenders are unlikely to pay. Additionally, interest rates on credit cards are typically much higher than on student loans, so using a credit card for student loan payments can be risky and may not be worth any rewards earned.
Some Navient customers have reported that they are able to pay their loans via credit card with no surcharge. These customers have Department of Education loans that are serviced by Navient, and they must call in every month and specifically request to pay by credit card. It is unclear if this is an option for all Navient customers or only those with Department of Education loans.
In conclusion, while it is possible to pay Navient student loans with a credit card, there is usually a surcharge involved, and there may be better alternatives to avoid paying this fee.
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Third-party payment services
Using a third-party payment service to pay off a student loan with a credit card can be beneficial in some cases, especially if you are trying to earn rewards points or take advantage of a 0% APR offer. However, it is important to consider the potential downsides, such as the risk of accumulating more debt due to higher credit card interest rates and the loss of borrower protections and benefits associated with federal loans.
Additionally, the fees associated with third-party payment services can be significant, ranging from 2.9% to 5% of the total payment amount. These fees may negate any rewards earned through the use of a credit card. Therefore, it is important to carefully consider the potential benefits and drawbacks before using a third-party payment service to pay off a student loan with a credit card.
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Convenience checks
While you can't pay your student loans with a credit card directly, there are a few options for using a credit card indirectly to pay off your student loan. One of these options is to use convenience checks.
Credit card issuers may offer convenience checks that you can use to access your line of credit and then pay bills, such as student loans. A convenience check is considered a cash advance on your credit card. When you use a convenience check, you will pay a cash advance fee, typically 3% to 5% of the check amount, and the check starts accruing interest immediately at a cash advance rate. That annual percentage rate may be higher than your purchase or balance transfer APR.
It is recommended that you contact your credit card issuer and ask about convenience checks and their requirements and restrictions.
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Federal vs. private loans
In general, student loan servicers do not accept credit cards. Federal regulations usually prohibit it, and credit card transactions involve processing fees that lenders are reluctant to pay. However, some Navient customers have reported being able to pay off their loans using a credit card over the phone, with a surcharge of $14.95. Others have reported no surcharge when paying by credit card.
Now, here is some information on Federal vs. private loans:
Federal student loans are issued by the federal government and are generally the best option for most borrowers. They are easy to qualify for, have low eligibility requirements, and offer a range of flexible repayment options. Federal loans also offer partial loan forgiveness with certain payment plans and do not require a credit check (except for Federal PLUS Loans for parents and graduate students). Additionally, if you become permanently disabled, your federal student loan balance is automatically discharged. Federal loans are typically cheaper than private loans, especially for undergraduate students with no stable income or long credit history. However, undergraduate students, particularly first-year students, face borrowing limits with federal loans.
Private student loans, on the other hand, are provided by banks, credit unions, and other financial institutions. They usually offer the choice of a fixed or variable interest rate. Fixed rates remain the same, giving predictable monthly payments, while variable rates can fluctuate. Private loans offer different repayment plans, including options to make interest-only or fixed payments while in school, potentially lowering the total loan cost. They also allow borrowers to track their credit health with quarterly FICO Credit Scores. Private loans are a good choice for students who have reached federal borrowing limits or do not qualify for federal loans, often due to credit history.
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Credit card debt drawbacks
While it is possible to pay Navient student loans with a credit card, it is not possible to do so directly. Navient requires that you call in to make a payment using a credit card, and it may be necessary to specifically request this payment method. Additionally, a surcharge may be applied for paying by credit card.
Now, here are some drawbacks of credit card debt:
High Interest Rates
Credit cards typically carry high interest rates, which can compound daily and quickly increase your outstanding balance. Interest rates on credit cards are usually much higher than those on student loans. For example, credit card interest rates can range from 15% to 20% or higher, while student loan interest rates are often lower.
Accumulated Debt
Making only the minimum credit card payment can lead to accumulated debt over time. This is because the minimum payment covers only a small portion of the debt, with most of it going towards interest. As a result, your credit card balance can continue to grow, even if you're not making additional purchases.
Fees and Charges
Credit card companies often charge various fees, such as annual fees, cash advance fees, balance transfer fees, and late fees. These fees can add up and contribute to your overall debt. When using a credit card to pay a bill, you may also incur additional charges from intermediary services, which can increase your overall debt.
Impact on Health and Wellbeing
The stress of carrying credit card debt can negatively affect your health and wellbeing. A study by the University of Missouri found that high debt can lead to joint pain or stiffness that interferes with daily activities. Additionally, individuals with high debt may have limited financial resources to invest in their health and wellbeing.
Difficulty in Repayment
Credit card debt can be challenging to repay due to the high-interest rates and accumulated debt. It may take a long time to repay, especially if you're only making the minimum payments. Missing credit card payments can further exacerbate the issue, as banks can then charge interest on top of the original payment owed, leading to a cycle of debt.
It is important to carefully consider the potential drawbacks and financial implications before using a credit card to pay off student loans or any other form of debt.
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Frequently asked questions
It is 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. Navient loan holders have reported being able to pay off their loans with a credit card over the phone, but this may come with a surcharge.
Yes, there may be a surcharge for paying Navient student loans with a credit card. One source mentions a \$14.95 flat fee for paying over the phone.
Paying Navient student loans with a credit card can offer some unique benefits, such as a lower interest rate and a minimum balance that aligns with your current needs. Additionally, you may be able to take advantage of introductory APR offers and earn rewards associated with using a credit card.
There are several drawbacks to paying Navient student loans with a credit card, including high-interest rates, negative impacts on credit scores, and the risk of accumulating more debt due to the high-interest rates. Additionally, there may be fees associated with third-party payment services, which can negate any rewards earned.
