Nowadays, nearly two-thirds of college students graduate with student loan debt, with the average debt load approaching $50,000 as of 2018. Millions of people are diligently paying off those loans, but even the most responsible borrowers can find themselves in a pinch — a job loss, a debilitating medical condition or another emergency that leaves them unable to make their monthly payment.
In such situations, can you put a student loan payment on a credit card? Not directly.
In general, student loan servicers do not accept credit cards. For one thing, federal regulations generally prohibit it. Further, every credit card transaction involves processing fees that are paid by the party that accepts the card as payment. Lenders certainly aren't going to pay those fees the way stores do. (Stores can accommodate credit card fees by factoring them into their prices, like any other cost of doing business.)
Using an intermediary
When you can't pay a bill directly with a credit card, one option is to use an intermediary service. These companies charge your credit card for the amount of the bill, then send a check for your payment. They charge you an additional fee to cover processing costs — and, of course, to make a profit.
The most prominent intermediary service is Plastiq, which charges 2.85% for credit card payments.
Using an intermediary is at best a last resort. Here's why: Say you have a $500 loan payment due. An intermediary might charge your card $515 — the amount of the payment plus a 3% fee — then send a check to your lender for $500.
Your loan remains in good standing ... but you're worse off than before:
You haven't reduced your debt. You've just moved it to a different place.
You're actually deeper in debt. The 4% fee added $20 to your total obligations.
The debt is more expensive. Interest rates on credit cards are higher — typically much higher — than on student loans. So that $500 worth of debt will cost you more to carry going forward.
Is it worth it for rewards?
Maybe you're thinking of putting student loan payments on a credit card in order to reap rewards. If you're going to be spending the $500 anyway, why not get some points or cash back on it? Bad idea. The processing fees you'll have to pay will almost certainly offset the value of the rewards.
How about a 0% card?
Putting the payment on a card with an introductory 0% APR period would at least spare you from having to pay interest in the short term. But you'd still have to pay the processing fees. And if you can't pay off the balance by the end of the 0% period, you'll be faced with skyrocketing finance charges.
In some very specific circumstances, you might be able to save money by paying off your entire student loan with a balance transfer to a 0% card. But if you're in a tight spot financially and just trying to scrape together a way to pay this month's bill, this isn't the avenue for you.
Alternatives to paying your student loan with a credit card
If you’re thinking of using a credit card to pay off your student loans, it might be because you don’t have cash on hand. But there are better options:
Enroll in an income-driven repayment plan. If your federal student payments are more than you can manage, contact your servicer about enrolling in an income-driven repayment plan. These plans will cap payments at a portion of your discretionary income — if you’re unemployed, your payment will be $0. It also extends the length of repayment to 20 or 25 years. When you hit the end, your remaining loan balance is forgiven.
Request a deferment or forbearance. Ask your federal student loan servicer or private student lender to take a payment pause. Federal loans are eligible for unemployment deferment or a loan forbearance if you need a break from payments. Most private lenders offer opportunities for pausing or temporarily lowering payments due to financial hardship. During any pause, interest will accrue on your loan, which will increase the total you owe when you start repayment.