Student loan debt is one of the most prevalent forms of consumer debt in the US today; according to data from the U.S. Department of Education, 42 million Americans held student loan debt totaling an estimated $1.59 trillion as of 2021.
In 2021, a typical graduate had student loan debt totaling about $39,351.
Imagine having to return tens of thousands of dollars over time; wouldn’t it be great if you could accumulate credit card points as you go? With just 1% back you could make some extra cash available in your pockets!
Can You Use a Credit Card to Pay Your Student Loan Bill?
U.S. Treasury no longer accepts credit card payments for student loans; nonetheless, some people continue to search for ways to move them onto cards with cash rewards as an alternative payment source.
Before making the transfer from student loan lender to credit card company, there are a few considerations you should take into account. Let’s examine if it is beneficial, how it should be implemented, and whether there may be rewards tied to paying down your student loans through credit cards.
Use your credit card to pay your loan payments if your servicer accepts credit card payments without fees or at a low price, and are consistent in making full monthly payments on your card.
Choosing the Correct Card for the Transfer
Apply and gain approval for a credit card offering both an attractive sign-up bonus and ongoing cash benefits, such as $500 cash back + 1% back on all transactions after spending $5,000 or more in your first three months as card member. However, these cards tend only to be given out to people with exceptionally strong credit histories.
What Takes Place Following a Payment?
Once your payment has been completed, log into your credit card account to ensure it shows as a purchase rather than cash advance. If everything goes according to plan, you should complete all requirements for the sign-up bonus and earn back one percent as soon as the signup bonus period ends. In order to avoid interest or late fees fees on future statements, pay in full on time each month.
By adopting this strategy, you can simultaneously reach three financial objectives: significantly decreasing student loan principal debt and saving the interest that would have accrued over time, as well as optimizing credit card rewards.
If your student loan servicer doesn’t charge fees for credit card payments of any amount, there’s no harm in using credit cards every month to settle your student loan bills – provided there are no outstanding balances on them.
Final thoughts
Final Thoughts Many student loan providers do not permit or permit using credit cards as payment options, or charge additional fees or place limits on what can be charged against your debt. These regulations were put in place to prevent customers from turning relatively low-interest student loan debt into higher-interest credit card debt and save lenders money by cutting processing fees for credit card payment processing fees.
But, if you have good credit card habits, some extra funds, a fantastic rewards credit card and a student loan provider who accepts credit card payments without charging fees for this payment method, paying student loans with your credit card could prove beneficial.