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Can You Pay For Student Loans With A Credit Card?
Student loan debt is a serious issue for many of us.
Americans are carrying a huge amount of student loan debt with approximately 65 percent of recent graduates carrying some sort of student loan debt, and each graduate leaving school with an average debt of $29,200.
It is no surprise that students and new graduates are often concerned about how they’ll pay down that debt.
One option people often wonder about is whether or not you can pay for student loans with a credit card.
Despite these challenges, it is still technically possible to pay student loan debt with a credit card.
However, it can be expensive, and it may not be your best bet. Let’s take a quick look at how to pay student loans with a credit card.
One of the simplest and most straightforward ways to pay your student loans with a credit card is by taking cash advances against the card.
You can go to an ATM or a bank and take a cash advance off of the card, much like you would with a standard debit card.
Then, you can deposit the cash in your checking account or purchase a money order and use it to make your monthly student loan payment.
In some cases, you may also be able to go directly to your lender and make a cash payment as well.
Your credit card company will likely charge you a fee for the cash advance, and you incur an increased monthly interest expense on your growing credit card balance.
However, if you feel you can manage your credit card debt more effectively right now than using cash, this could be a good, albeit temporary choice for you.
One of the most expedient ways to pay off your student loan debt with a credit card is to use a balance transfer.
Credit card companies often offer cards with low introductory rates that you can use to transfer existing debts to.
The repayment terms on the credit card are usually more flexible than what you’d face with a continued monthly student loan payment, which could be a good fit for your current financial situation.
You may also be able to benefit from the card’s rewards program by executing a large student loan transfer, too.
You could put the points you rack on that transfer to good use in many different ways – including paying down your debt.
However, there are drawbacks to using balance transfer cards for student loan debt.
While the card’s introductory rate may be low initially, most credit card companies raise rates over time.
This could lead you to incur significant monthly interest expenses on the debt, which could be difficult to pay down.
Additionally, most of these cards charge some sort of balance transfer fee as well, which can range from one to five percent of the overall student debt you transfer.
How To Pay Your Student Loan With A Credit Card – Third-Party Services
Another way you can use your credit card to pay student loans is by using a third-party bill paying service.
One of the best examples of these services is Plastiq. If you establish a Plastiq account, you can link it to one or more of your credit cards.
Then, you can use Plastiq to pay your student loan debt, which it does through an ACH transfer or some other form of acceptable payment.
Using third party services can be costly, however. Plastiq typically charges a 2.5 percent fee on transactions using your credit card; so, if you use Plastiq to make a $500 monthly student loan payment, you will be charged $12.50.
You may be able to offset this cost somewhat by leveraging your credit card’s rewards points.
Additionally, Plastiq allows you to earn “Fee-Free Dollars” through promotions and other means that can be used to pay transactions without incurring a fee.
However, if you are going to use a third-party system to pay your student loan with a credit card, expect to pay more.
Things to Consider Before Using Credit Cards for Student Loan Debt
Before you use a credit card to pay student loans, make sure you think carefully.
If you use a credit card to pay another debt, you’re just transferring that debt from one lending platform to another; you’ll have to deal with it sooner or later.
While your monthly credit card bill may be easier to manage than a student loan payment right now, the balance on your card could balloon to an unmanageable amount over a relatively short period of time, too.
So, if you’re preparing to whip out the credit card for a student loan payment, make sure there are no better options out there for you.
Additionally, due to the coronavirus pandemic, you may be eligible for student loan relief right now that could allow you to hold off on using your credit card for loan payments.
Coronavirus Aid, Relief, and Economic Security (CARES) Act
The recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act put all student loan repayments into forbearance, or suspension, until September 30, 2020.
This means you do not have to make a student loan payment until September 30th, although you still can if you want to.
So, instead of making any student loan payments with your credit card, you could halt your payments now, use this time to improve your financial situation, then resume making cash payments on your student loan balance during the fall.
Parting Thoughts: Can You Pay for Student Loans With A Credit Card?
You can use your credit card to pay your student loan debt. Any of the means discussed above are effective ways to put your credit card to work paying student loans.
However, before you choose to do so, make sure using credit cards to deal with student loan debts is the best choice for you.
Using credit cards can be costly and there are inherent risks to incurring large credit card balances that carry over from month to moth.
There are also many other options out there for dealing with student loan debt, including coronavirus-related forbearance.
So, weigh all your options for dealing with your student loan debt, and make the choice that works best for you.
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