Can you pay student loans with a credit card?

Student loan borrowers in the U.S. had outstanding loan debt between $20,000 and $24,999 on average in 2018, with monthly payments ranging from $200 to $299, according to Federal Reserve data.

If you're struggling to make your student loan payments, you may be tempted to pay your student loans with a credit card. Neither federal loan servicers nor private lenders accept credit card payments, but you can technically pay down student loan debt through a credit card balance transfer.

That said, it's not advisable to use a balance transfer this way because of how it can impact your finances and credit history. Here's what you need to know.

• Can you pay student loans with a credit card?
• Why paying student loans with a credit card is a bad idea
• What to consider before you pay student loans with a credit card
• Other ways to manage student loan debt

Can you pay student loans with a credit card?

You may be tempted to use a credit card to pay your student loans, especially if you're nearing default and want to avoid it. But the process of using a credit card to pay student loans is complicated.

U.S. Department of Treasury regulations don’t allow federal student loan servicers to accept credit card payments, and private lenders have followed suit, only allowing you to make payments from your bank account.

One way to get around that is to use a balance transfer check, which some credit card companies send to cardholders from time to time. These checks often come with a 0% intro APR promotion and a small balance transfer fee.

You can write out the check to your lender and submit it as payment or write in yourself as the payee and deposit it into your checking account and make a payment from there.

While this option may be appealing because it can help you avoid default and potentially give you no interest for a period of time, the drawbacks outweigh the benefits.

Are student loan interest rates lower than credit card interest rates?

On average, student loan interest rates are much lower than credit card interest rates. Even if you can score an introductory 0% APR promotion with a balance transfer check, that promotion won't last forever.

Once it ends, you'll be back to your card's regular APR. If you haven’t been able to pay off the full balance by the time the introductory APR ends, any interest savings you gained during the promotional period will likely be wiped out.

Why paying student loans with a credit card is a bad idea

It's risky to pay your student loans with a credit card for several reasons. Even with the possibility of getting a 0% APR promotion on a balance transfer check, it’s not recommended that borrowers use a card to pay their student loans. Here's why:

• Higher interest rates — Some credit cards offer introductory 0% APR promotions for a year or longer. But once that promotional period is over, you’ll end up paying a much higher interest rate.
• No set repayment term — Unlike student loans, credit cards don’t have a set repayment term, making it easy to get caught in the minimum payment trap. As a result, there’s a high risk that you’ll end up paying the debt (again, at a much higher rate) for longer.
• Balance transfer fees — You may be thinking about using this strategy if you're almost done paying off your loans and want to enjoy some interest savings in your last year or so of repayment. But remember that balance transfer checks typically come with a fee, which can be as high as 5% of the transferred balance. Depending on the balance and your student loan interest rate, you may actually save more by sticking with your regular student loan payments.
• Credit utilization — Your credit utilization ratio is an important factor in determining your credit score. The rate is calculated by dividing your credit card balance by your card's limit. So if you pay off a large chunk of your student loans with your credit card, the resulting high balance could cause your credit utilization to spike, damaging your credit.

You can compare student loan refinance rates on Credible without affecting your credit.

What to consider before you pay student loans with a credit card

While it’s not a good idea to pay student loans with your credit card, if you choose this option, you’ll need to carefully consider the following factors:

• The fine print — Some balance transfer checks may include terms stating that the check will count as a cash advance if you use it for anything other than paying off another credit card. If this happens, you may miss out on the 0% APR promotion, and you may even be charged a higher interest rate than your card's regular APR. Also, in some cases, if you miss a payment during an introductory 0% APR promotion, the card issuer may end it immediately, charging you the card's regular APR.
• Credit card fees — Make sure you understand how much the balance transfer fee is and compare that to what your interest savings would be over the introductory period.
• Interest charges — Once the promotional period is over, you'll be paying your card's regular APR, which will likely be much higher than your student loan interest rates. Consider whether it's worth risking more interest charges later on for a short-term break.
• Potential effect on your credit — Think about how using a balance transfer to pay down student loan debt will impact your credit utilization ratio. If you think it'll take you some time to pay off the balance, you could end up with a low credit score for a while, which can cause you to miss out on interest savings on future loans and credit cards.

Remember, the only time paying a student loan with a credit card might make sense is if your remaining student loan balance is a small amount, you have a balance transfer check with an introductory 0% APR (with no threat of a cash advance), and you know you’ll be able to pay off the entire amount, interest-free, before the intro period expires.

Even then, though, run some numbers on how much you'll pay in interest on your student loans and compare that to the balance transfer fee to determine if it's actually worth it.

Other ways to manage student loan debt

If you're considering using a credit card to pay student loans because you're struggling to keep up with payments, here are some alternatives to consider that won't put your finances and credit at risk.

Apply for deferment or forbearance

Deferment and forbearance both offer a break from student loan payments for a period of time, which can vary depending on the type of student loans you have and your lender. You may be eligible if you have federal student loans and you're experiencing financial hardship or if you're returning to school for another degree.

These options can be helpful if you can’t afford to make your monthly payments but don't want to get on an income-driven repayment plan. Keep in mind, though, that interest will continue to accrue on your loans, even if your payments are paused. The only exception is if you have subsidized federal student loans and you're on deferment.

Enroll in an income-driven repayment plan

If you have federal student loans, income-driven repayment plans may help if you’re struggling to keep up with monthly payments due to your income.

You can choose from four different income-driven repayment plans, and your payment will be between 10% and 20% of your discretionary income. Your loan servicer will calculate this based on your income, the poverty guidelines for your state and family size, and a percentage based on the plan. Your repayment plan will be extended to 20 or 25 years, after which any remaining balance will be forgiven.

This can be a good option if you anticipate needing lower monthly payments for the long term. That said, you'll ultimately pay more interest over the extended repayment schedule.

Consolidate your federal student loans

If you're worried about defaulting on your federal student loans, you can consolidate them into a Direct Consolidation Loan through a new loan servicer, or even the same one. Depending on the type of loans you have, consolidating could give you access to more income-driven repayment options and even loan forgiveness programs. You could also choose a repayment plan as long as 30 years, which will reduce your monthly payment.

But consolidating won't necessarily secure a lower interest rate. Your new rate will be a weighted average of your existing loan rates.

Refinance your student loans

If your credit and income are in good shape, you may be able to refinance your student loans and score a lower interest rate. You can also get some additional flexibility with your monthly payments, as many private refinance lenders offer terms ranging from five to 20 years.

But if your credit isn't in good shape, you may need a cosigner to help you qualify. And if you don't have a cosigner, refinancing may not be an option for you. Also, refinancing federal student loans with a private lender will cause you to lose access to federal loan benefits and protections, so think twice about refinancing if you want to retain access to income-driven repayment plans and forgiveness programs.