How to Use a 0% Balance Transfer Credit Card to Repay Your Student Debt

If you’ve spent time brainstorming ways to get out of student debt faster, you’ve probably wondered if you can use a credit card to pay off student loans. Although the idea might seem far-fetched at first, transferring some of your student loan debt to a credit card is technically possible.

Those with good credit might qualify for a 0% APR balance transfer card which can save on interest fees. Theoretically, the strategy can help you get out of debt faster because of the temporarily lowered interest rate.

Yet there’s a reason this strategy isn’t popular. Though it’s possible in some situations, it isn’t the best option for many student loan borrowers. Here’s what you need to know to decide if the balance transfer student loan repayment method is right for you.

Can I transfer student loans to a credit card?

Before considering how you’d pay your student loans with a credit card, it’s important to discover if it’s possible in your situation. The federal government generally doesn’t allow federal student loan servicers to accept payments via credit card. However, private lenders might have different regulations.

Unless you have student loans with private lenders, you can’t pay your student loans directly with a credit card.

Some credit card companies let you transfer the balance of your student loans onto a credit card. If you have a card with a 0% introductory APR, this means you won’t owe any interest on the balance for the duration of the introduction period.

If you go this route, here’s what you’d have to do to transfer student loans to a credit card successfully:

• Step 1. Research credit cards with 0% APR introductory balance transfer offers.
• Step 2. After comparing cards, apply for the one that best suits your needs. You’ll likely need to undergo a credit check, provide information about your income, and verify your identity.
• Step 3. Transfer the balance of your student loans to your new credit card.
• Step 4. Repay your credit card before the introductory rate expires. Remember, after the introductory period ends, the interest could increase substantially. The card issuer will likely charge you interest from the first day of your balance transfer, not the day the introductory period ends.

Pay attention to when your introductory interest rate expires and set a reminder on your calendar two to three weeks in advance. If you can’t repay your balance in full during the promotional period, consider a personal loan to avoid paying substantial interest charges.

Related: First Republic Bank’s Student Loans are Actually Personal Loans

Pros of a student loan balance transfer

You can technically use a balance transfer strategy for a private student loan. Still, that doesn’t necessarily mean it’s the right approach for you. A few benefits exist, and here’s why some borrowers are drawn to this idea.

• You’ll pay less interest: When you transfer the balance of your student loans to a 0% APR card, you won’t pay interest on that balance for the length of the introductory period. Introductory rates can be as short as a few months or a little longer than a year — but usually last about a year. You must pay off your new credit card before the introductory period ends to take advantage of the 0% rate.
• No student loan servicer: If you don’t get along with your lender and feel its customer service is hampering your ability to repay your loan, a balance transfer to a credit card can help you cut ties.
• Increased motivation: If commitment is what’s been missing from your student loan repayment strategy, the balance transfer student loan repayment method could be the cure. It gives you a shorter timeline to repay the balance, and the clock starts ticking as soon as you open a new card account.

Paying less interest is an attractive option if you’re laser-focused on paying off debt. However, there are downsides to be aware of before using the balance transfer method.

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Cons of a student loan balance transfer

Although it’s possible to use the balance transfer card to pay off student loans, the strategy isn’t favorable for most borrowers. Here’s why.

• Issues when transferring the balance: The amount you can transfer is limited to your credit limit on the card. Because it isn’t likely that you can transfer a balance higher than your limit, this method might not work for all of your student loans.
• Balance transfer fee: Most credit card issuers charge a balance transfer fee of 3%, which reduces some potential savings you might have with a lower or introductory APR.
• High risk: If you can’t pay the balance before the introductory rate ends, your interest rate increases — sometimes as much as 25% APR or more. In that case, this method would backfire. You could pay more in interest than if you’d left your loans with your servicer or lender.
• Lose loan protections: The federal government has benefits in place for student loan borrowers, such as forbearance and Income-Driven Repayment (IDR) options. The programs could be a major help if you experience hardship. Private student lenders might offer similar services, but you’ll no longer qualify for these benefits if you transfer your balance to a credit card.

Besides the balance transfer fee and losing federal loan protections, the biggest downside to transferring your student loans to a credit card is the risk of not paying the balance by the deadline.

For example, you’d pay nearly $2,000 in interest on a balance transfer of $7,000 if you fail to pay it off before the end of the introductory period.

Related: See how much you can save by refinancing student loans

Alternative ways to repay student debt

For most borrowers, alternate options can result in a better outcome. Here are strategies you could pursue to repay your student loan debt:

• Refinancing. If you qualify for a lower interest rate now than you did when you originally got your student loans, you could refinance your student loans. This would save you money in interest payments. Unlike the balance transfer method, you’d avoid the pressure of the introductory rate deadline. Plus, you’d likely be eligible to refinance all of your student loans at once instead of running into challenges with a credit card limit.
• Income-Driven Repayment. Federal student loan borrowers can take advantage of Income-Driven Repayment options. If you’re struggling to make your monthly payments, IDR may lower your monthly obligation by capping your monthly payments at a percentage of your income.
• Employer student loan benefits. Companies might include employer student loan repayment assistance as part of their benefits package. You could ask your current employer about a possible benefit or pursue it at your next place of employment. Getting an extra boost from your employer each year could help you repay your student loan principal faster.

Who should use the balance transfer method?

Most borrowers should scratch the balance transfer idea off their list — it’s risky, the potential reward is not substantial, and there are other options to repay student debt faster.

The only use case where you might benefit from this strategy is if you’re near the end of your repayment term. If you have a small balance left on your student loans and won’t have trouble repaying the full amount within a year, transferring the balance to a 0% APR card could help you save money and get out of debt marginally faster.

Refinancing or opting for an IDR plan typically gives you better results. If you’re unsure what repayment strategy is right for you, book a consultation to speak with one of our student loan experts.