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If you’re anything like me, you take every and any opportunity to use your credit card! When I had to pay down $37,000 worth of student loans, I did an internet deep dive to figure out where you can pay student loans with a credit card.
The internet was divided, and the information was far from straightforward.
I’m going to save you the time I spent scouring the internet and my trials and errors and give you everything you need to know about paying student loans with a credit card in one short(ish) blog post!
You’re welcome. 😉
The short answer is yes! you can pay your student loans with a credit card. You have to use a third-party platform like PaySimply or Plastiq to pay your student loans with a credit card. But just because you can doesn’t mean you should! You have to do a cost-benefit analysis to make sure you’re getting enough benefit out of paying the third-party fees to pay your student loans with a credit card rather than paying them in the traditional way.
The only way it is beneficial to pay your student loans with a credit card is if you use a travel rewards card.
There is no scenario in which it is in your best interest to pay your student loans with a credit card that only gives you cash back. You lose in that situation thanks to the fees you pay for using PaySimply or Plastiq.
I personally paid over $11,000 worth of my student loans with a credit card through PaySimply and earned over 170,000 points just in sign-up bonuses. That doesn’t include the points I earned by just spending money on my card!
I think paying students loans with a credit card can be a great way to earn free travel, but it has to be done in the right way.
Otherwise you’ll get burnt, and it won’t be worth it!
Oh. And this information applies to government loans. If you have private loans, this strategy may not work for you.
How to Pay Student Loans with a Credit Card
I know this is what you came for, so I’m going to get right to the good stuff!
Unfortunately, you can’t pay your student loans with a credit card directly through the government loan website.
That would be amazing!
The government doesn’t want people going into absurd amounts of credit card debt just to pay their student loans, so they make it difficult to do.
Student loans have a very low interest rate. If you don’t have enough money to make bulk payments, don’t use use a credit card to pay your student loans. If you only have the means to pay the minimum balance every month, stick to paying your student loans the traditional way.
But if you have the ability to make bulk payments on your student loans and want to use a credit card to do so, it is quite easy!
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The Steps
Here are the steps you have to take to pay your student loans with a credit card:
- Step One: Log into your loan account and navigate to the page that has your loan number
- Step Two: Go to either PaySimply or Plastiq
- Step Three: Follow the prompts on either PaySimply or Plastiq. You have to enter your student loan number, the payee, how much money you want to pay towards the loan, and how you want to pay. In most instances, you have to select Paypal in order to pay with a credit card.
- Step Four: Make your payment and keep the email receipt from PaySimply or Plastiq in an email folder or somewhere safe, so you don’t lose it in your inbox
- Step Five: Check your student loan account in 3-7 business days to make sure the payment went through
- Step Six: Do a happy dance knowing you just earned a bunch of travel points!
Important note: it is best to use new credit cards when paying your student loans. This lets you easily meet your minimum spend and earn those sweet, sweet sign-up bonuses.
You may want to consider opening multiple credit cards when paying off your student debt.
This allows you to maximize your points and get multiple sign-up bonuses when paying down your debt!
I personally opened four different credit cards when paying my student loans with credit cards. I met the minimum spend on each credit card and then moved onto the next. This allowed me to get the most points possible!
PaySimply vs Plastiq
You can choose between PaySimply and Plastiq to pay your student loans with a credit card.
The two platforms are very similar and tend to have the same payees, so it doesn’t really matter which one you choose.
My preference is PaySimply.
I prefer PaySimply because you don’t have to create a profile to use the service unlike with Plastiq.
PaySimply isn’t any more or less anonymous than Plastiq just because you don’t have to create a profile. It is nice to have one less password and account to remember though!
I created an account on Plastiq just to compare the fees, and they sent me at least two or three emails a day every day until I deleted my account. It was beyond annoying.
The fees on both platforms are completely the same, so neither has an advantage in that regard.
My recommendation is to start with PaySimply and move to Plastiq if they don’t have the payee you need.
How to Decide if You Should Pay Your Student Loans with a Credit Card
Paying off student loans with a credit card is not the right move for everybody.
In fact, I’ll go so far as it say it isn’t the right move for most people.
You need to do a cost-benefit analysis to make sure that you’re coming out of the process in the black and not the red.
It is very easy to not get your money’s worth of points when paying student loans with a credit card.
Choose the wrong points or use a cash back credit card, and it isn’t worth the 2.5% fee PaySimply/Plastiq charges.
This is how to figure out if this is the right decision for you:
- Do you have enough money to pay a lump sum on your student loans? If yes, move to the next step. If no, stop reading now and read this post instead.
- Figure out what it is going to cost you to use a credit card to pay your student loans. Multiple the amount you’re paying towards your loan by 2.5% to get the fee cost.
- Do some research and figure out how much each point that you’re earning is worth. Most points are valued between $0.025 and $0.01.
- Multiply the value per point by the total fees.
- Take the total fees and add the card’s annual fee (if applicable).
- If the points you can earn are worth more than the cost of the fees and annual fee, you’re good to proceed. If not, stick to paying your loans the traditional way.
Example
The American Express Gold Canada card is one of the most popular travel credit cards in Canada, so we will use it for the example.
With the Amex Gold Canada, you have to spend $1,500 to get the 25,000 MR point bonus. We will assume you’re putting $1,500 towards your student loan to meet the minimum spend on the card.
MR points have an estimated value of $0.01 per point.
This is a conservative estimate, and you can often get a higher value per point. But it is best to err on the side of caution to make sure you’re benefiting from paying your student loans with a credit card.
Here’s what we would do to decide if it is worth paying your student loans with the Amex Gold Canada card:
- $1,500 x 2.5% = $37.50 in fees to pay your student loans with a credit card
- You receive 25,000 MR points as a sign-up bonus and earn the base 1,500 MR points for spending $1,500 on the Amex Gold. That is a total of 26,500 MR points for this transaction
- 26,500 x $0.01 = $265 worth of value at a minimum in points earned
- $37.50 (fees) + $150 (annual fee) = $187.50 total cost for getting the Amex Gold Canada card just to pay down your student loans with
In this example, you earn enough points to cover the 2.5% fees from PaySimply/Plastiq and the credit card’s annual plus have $77.50 worth of additional points that you earned.
But if the math showed that the fees and annual fee came out to $275, then it would not be worthwhile to pay your student loans with that particular credit card.
I hope that explanation makes sense! If it doesn’t drop me a comment below, and I’ll help you out!
Why You Can’t Use a Cash Back Credit Card
I want to make it very clear because I don’t want any of you making this mistake.
There is no scenario in which you should be using a cash back credit card to pay your student loans!
One more time for the people in the back: do not use a cash back credit card to pay your student loans!
The reason for this is very simple: the math doesn’t add up!
Many cash back credit cards give you up to 3% cash back but only in certain categories like dining and transportation.
Paying your student loans doesn’t fall into one of those elevated earning categories, and you only earn at most 1% cash back.
When you do the math, you see that 2.5% – 1% = 1.5%.
You are losing 1.5% thanks to the fees when you pay your student loans with cash back credit cards.
It isn’t worth it!
Either pay your student loans traditionally or get a travel credit card if you really want to pay your student loans with a credit card.
A Word of Warning
I want to make one more thing abundantly clear.
Never pay your student loans with a credit card if you don’t have enough cash to pay off the card’s entire balance before interest starts incurring.
No matter how many points you earn by using a credit card to pay your student loans, you are in the red if you have to pay interest on your credit card.
The interest rate on credit cards is painful, and is often over 22%.
Plus not paying your credit card in full negatively impacts your credit score. You need a strong credit score as a travel hacker.
I know most people don’t have a bunch of spare cash just sitting around to put towards their student debt. It can be difficult to pay your student loans with a credit card for that reason alone.
If you really want the points but don’t have the money to make a big enough payment to meet the minimum spend, I recommend saving a little money each month and waiting to make a bulk payment until you have enough saved up.
I also highly recommend you save the equivalent of you monthly payment each month when you’re in your 6 month grace period.
Assuming you’re fortunate enough to have a job!
Then use the money you saved in those six months to make a bulk payment on your student loans with a credit card.
But no matter your financial situation, please, please, please never pay your student loans with a credit card if you don’t have the cash in your bank account to pay off your credit card.
Pros of Paying Your Student Loans with a Credit Card
- Potentially earn a ton of points
- Pay off your student loans quicker because you’re making additional bulk payments on the loan
- Can help increase your credit score (I do not advocate paying student loans with a credit card if you can’t pay off the entire balance before interest hits)
Cons of Paying Your Student Loans with a Credit Card
- There is no way around paying the 2.5% fee through PaySimply/Plastiq
- Can’t use a cash back credit card
- Can potentially temporarily lower your credit score if applying for multiple credit cards in a short time frame
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Conclusion
There you have it! You’re officially a cool kid and know exactly how to pay your student loans with a credit card!
It is a pretty easy process, and you can earn a ton of points using this strategy!
I have absolutely no regret paying off a large chunk of my student loans with a credit card even though it cost me an extra 2.5% in fees!
But, again, I want to lecture you again on not using a cash back credit card to pay your student loans and don’t put any money towards your student loans that you don’t have to pay off your credit card bill immediately.
As long as you steer clear of those two no-nos and do the math to make sure you’re getting enough value in points, go wild and have fun!
I’m all for finding creative ways to earn credit card points, and this is one of the most lucrative ways!
Plus it is 100% within the legal boundaries of travel hacking and ethical, so that is a huge plus!
I always tell you tips and tricks that work within the current credit card system and will never give you any tips that are unethical or fall outside the realm of fair play. Don’t worry!
