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Paying Off Student Loan with Credit Card: Good or Bad Idea?

As anyone who has recently applied for a student loan recently can tell you, the cost of higher education is not cheap. Depending on the school and residency requirements, the average cost of obtaining an undergraduate degree can range from about $30,000 annually to as much as $120,000 per year. And these costs may not even include the costs of books, supplies, lodging, transportation or other expenses.

Additionally, in recent years, federal loan interest rates have increased, making student loans increasingly expensive. This means the loans may take longer to pay off and end up costing in interest.

With interest rates for student loans averaging between 4.29 % and 6.84% interest, does it make sense paying student loan debt with a credit card?

Paying off student loan debt with credit card

Zero-Interest Credit Card Offers


Special introductory card offers with zero-interest charges on balance transfers may be tempting, as are credit cards that offer airline miles and reward points in exchange for transferred balances. But, keep in mind it’s not uncommon for card issuers to charge a small percentage of the balance being transferred, which translates into additional costs.

In other cases, the zero-interest period lasts about a year. When that time has passed, credit card interest rates (usually higher than the rates student loans offer) will be applied to the remaining balance. The consumer can transfer the remaining balance to another zero-interest credit card for the cost of a transfer fee if they want to continue to paying off student loan with credit card.

If there are no other zero- or low-interest credit card offers, the borrower runs the risk of taking on high interest rates following the initial “no interest” window.

Can you make a student loan payment with a credit card?

What about making a student loan payment with a credit card? The answer is yes, so long as there is available credit on the credit card.

But the relief it brings the borrower will likely be temporary. If the full amount placed on the card isn’t paid in full by the next payment due date, interest is applied and it will likely be at a higher rate than the student loan’s interest.

Credit card debt can be discharged, but…

A student loan cannot be forgiven; however, credit card debt can be discharged in a bankruptcy. Now the bad news: The cost to pay off student loan with credit card can be high, because the loan portion will not be discharged in a bankruptcy. In other words, refinancing a federal education loan by moving the balance to a credit card is not a good strategy it will likely backfire.

There are other options to help stressed borrowers with large student loan balances.

Alternatives to paying a student loan with a credit card

If a student loan borrower is having trouble making the minimum payment required, they are entitled to request a temporary postponement. Federal law permits temporary deferments and forbearances to prevent students from defaulting on their loans or making late payments. However, during a forbearance period, the loan may still accumulate interest depending on circumstance.

If the borrower also has other outstanding debts, such as multiple lines of credit, it can make meeting the student loan obligations even more challenging. In these cases, a consolidation loan – bundling the various debt together – may help. Consolidating outstanding debt (beyond student loans) may make sense, because consolidation loans often offer more attractive interest rates than those offered by card issuers. Instead of numerous credit card bills, one single monthly payment may also be easier to manage.

Making the right choice of an online lender with flexible options to help manage payments may be a better option than paying student loans with credit cards.


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