Can I pay my student loan with a credit card?

As far as I can tell, it’s not possible to pay off student loan debt with a credit card. I’m currently making payments through Great Lakes borrowing services. There is clearly only an option to add a bank account.

I’m curious whether or not there are any work-arounds? I’d love to reap the rewards of credit card cash back on my loan payments.

3 thoughts on “Can I pay my student loan with a credit card?

  1. D Stanley

    Probably not, and here’s why:

    • Credit card make their money by charging retailers 2-3% for using their services. They also make money on interest and late fees, but the retail charge is a large source of income, and applicable even if you don’t carry a balance.
    • Retailers bake this cost into their prices. You used to see different prices for cash vs. credit from some retailers, but those are largely gone. Instead you see the fee passed on when retailers or agencies allow you to use a credit card for items that they have no price control over (e.g. auto registration fees at the local DMV)
    • The fee they charge is higher than the cash back or rewards that they give you, so when you choose to use a credit card versus paying cash just to get the reward, then the bank makes a net profit.
    • If the loan servicer did not pass the fee on to you, they’d have to eat the fee with no benefit for them
    • If the loan servicer passed the fee on to you, then you’re probably paying more in fees than you’d get in rewards (though there are exceptions).

    That’s also why cash advances incur a 2-3% fee – it’s essentially the fee that the card company would have gotten from whatever retailer that you’re spending the cash on.

  2. n00b

    Yes its possible, but in a round about way, and with a ~1% fee.

    A “Gift of College” (GOC) account can be used for this purpose. They can be used to pay student loans. You can find a full break down of the method here, but the short of it is you can buy G.O.C. “gift cards” (used to load a Gift of college account, to pay student loans) at Toys R’ Us with a credit card. In short;

    1. Open a Gift Of College account online, and link it to your student loan account (free).
    2. Buy Gift of College gift cards at Toys R’ Us with a credit card. Buy in $500 increments. You will incur a 1% fee in this step for the price of the “gift card” (around $6 I believe). You can buy GOC gift cards online, but in lower increments (effectively increasing the fee % you are paying).
    3. Load the GOC gift card to your GOC account online, then use the account to make a payment towards the loan.

    That’s it. A few caveats;

    • You may not find the GOC gift cards at your local Toys R Us.
    • If you find them, they may have a policy which dissalows buying gift cards with a credit card.
    • Even if they don’t have said policy, some clerks try to apply limitations that don’t exist. In this case, its worth trying a different day with a different clerk.
    • GOC may not have (or may remove) your student loan processor at any time.
    • GOC may decide your account has suspicious activity and shut you down. In this case, you would most likely get your money back, but it would be a hassle.
    • Your CC company may flag you for suspicious activity. In the best case, they just confirm the transactions were done by you. In the worst case they shut you down for ‘manufacturing spend’.

    The last two cases are unlikely, I think, but still possible. Keep all documents/receipts/gc’s just in case, and start small (for example, try a $1 transaction to make sure the workflow works for you before ramping up).

  3. Mehrdad

    To answer question you have asked:

    I have never looked into this so I am not sure if they allow it, but it may be possible to take a cash advance and immediately do a balance transfer to a low-APR card.

    Of course you will still incur fees, but hopefully the interest rate would be worth it.

    To answer the extra comment you have added:

    No, you will not get the cash back on this.

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