Can I Pay Off My Student Loans With a 0% Credit Card Balance Transfer?

Paying student loans with a credit card may be possible (if you jump through some hoops), but it's not a good idea.

Anisha SekarSeptember 18, 2020
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Moving debt to a balance transfer card with a 0% introductory APR period can save you hundreds or even thousands of dollars in interest. And while high-interest credit card debt is the most common kind of balance transferred, it's not the only kind of balance you can transfer.

Several major credit card issuers allow you to transfer student loan debt to their cards, as well, but whether that's a good idea depends a lot on your particular situation.

Except in rare cases, it isn't a good idea.

Nerd tip: If you're struggling to make your student loan payments, look at refinancing your student loans or switching your student loan repayment plan through the government rather than chasing a quick fix with a credit card.

Is it even possible?

Before getting into whether you should pay off your student loans with a 0% credit card, you’ll have to determine whether you can.

The first thing to know is that the lender or loan servicer is unlikely to just let you pay your student loan with your credit card the same way you'd use your card to buy, say, a T-shirt. Federal regulations generally prohibit it. Plus, it would qualify as a purchase, which means the lender would have to pay processing fees on the transaction.

If you want to use a credit card to pay your student loan, you'll have to do it as a balance transfer. In this type of transaction, you're not really putting the payment "on the card." The bank that issued your card pays your lender directly. That is, instead of you writing a check to the student loan company, the issuer does it. Then the card issuer adds the amount to your credit card balance.

Are you eligible for a 0% card?

Plenty of credit cards will let you transfer a balance, but it doesn't make any sense to do so unless the interest rate on the card is lower than the rate you're currently paying on the debt you transfer.

On the whole, student loan interest rates are much lower than credit card interest rates, so this is a bad idea unless you use a card with a 0% introductory APR period for balance transfers. Balance transfer credit cards typically require good to excellent credit. If you're just out of school or have a low credit score, you might not even qualify.

But wait, there's more:

  • Even if you do qualify, the issuer might not accept student loan transfers. (See issuer guidelines here.)

  • Even if the issuer allows it, you might not get a credit limit large enough to cover the outstanding balance of your student loan.

  • Even if you get a suitably large credit limit, the issuer may limit the total balance you can transfer to the card.

  • And finally, even if you clear that hurdle, most balance transfer cards charge a fee of 3% to 5% of the amount transferred.

That last point means that if you moved, say, $20,000 to a credit card, you'd owe $600 to $1,000 in fees right off the bat, which might be enough to wipe out any interest savings you might have had, too. Over the years, a few cards have offered a $0 transfer fee, but that's gotten increasingly rare.

Nerd tip: In case you're wondering, balance transfers generally do not earn rewards. So don't expect to rack up cash back or points by moving your student loan to a credit card. In those rare cases where cards do offer rewards for transfers, it's almost guaranteed to not be enough to make up for the transfer fee.

Can you pay it off in time?

The 0% period on a balance transfer card doesn't last forever. You typically get 15 to 18 months at 0% before the rate soars to the ongoing APR, which might be 15%, 20% or more. If you don't have your transferred student loan balance largely paid off by the time the clock runs out, you'll start getting hit with big-time interest charges.

In other words, getting 18 months at 0% seems like a money-saving option compared with a student loan interest rate of, say, 5%. But when the rate on your debt spikes to 17.99% at the end of those 18 months, you could easily end up paying more interest in the end. (Not to mention that transfer fee that starts you out even deeper in the hole.

Could this make sense for anyone?

A balance transfer for student loan debt might make sense in a very specific situation. If you are at the tail end of your loan repayment period, with a balance you could comfortably pay off within the 15-to 18-month window of a typical 0% card, and you can qualify for a card with a 0% period and no balance transfer fee, then sure, the numbers might come out in your favor. But there are a lot of elements to that "if" statement.

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