Posted by Chuck on December 27, 2016
Manufactured Spending

Published on December 27th, 2016 | by Chuck


Federal Student Loans Can’t Be Paid with a Credit Card Beginning 2017

A few Reddit members received an email today from Great Lakes about their student loans informing them that credit card payments won’t be an option beginning January 1, 2017.

The letter indicates that this change is due to a new rule from the US Department of Treasury for all federal student loan servicers. As such, I assume it will affect all federal student loan providers. The change was made known on 12/21/16 and will go into effect on 1/1/17.

We’re writing to you because our records show that within the past six months you’ve used a credit/debit card to make a student loan payment. On December 21, 2016, we were notified that per the U.S. Department of Treasury all federal student loan servicers can no longer accept credit card payments, effective January 1, 2017. We realize this may be an adjustment and we’re here to help in any way we can.

This change will only affect federal student loans providers, like Navient. Max out whatever payments you can now before January 1st.

A few things that will still work:

  • You can still use a bill payment service such as Plastiq to pay student loans with a credit card, albeit with a fee
  • You can still buy Gift of College gift cards with a credit card and use those to pay the loans, albeit with a fee
  • You can still use debit cards so Visa/MC gift cards might still work (Great Lakes clearly includes “debit and prepaid credit cards”)

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not surprising since 37% of all borrowers of student loans make any payments towards it. The liberal loan forgiveness programs are an open invitation for tens of millions of borrowers to simply stop paying off their loans, adding another trillion dollars or so in federal budget deficits over the next decade or so.

Keep politics out of this discussion.

yeah we need that money for the section 8 wic welfare food stamps for the refugees and their no limit baby cannons

hmmm i wonder why the increase in higher education costs has outpaced inflation by 4x since the 1970s… economics is the ultimate enemy of liberal thinking

Sure, if you ignore the fact that higher education costs less in countries with more liberally economies. Just continue pretending the rest of the world doesn’t exist.

Yea, I also hear a pound of rice is cheaper in Communist North Korea (well, if you can find any that is). Great point gopher

He’s clearly referring to the 20-30 countries which are better than the United States and rank above it in most indices, not fucking North Korea.

US median wealth is 1/2 that of the UK and 1/4 that of Australia.

Easy answer. Right-wing state governments have cut state support to just 31% of original base levels. Tuition had to rise to meet the gaps. No need for your morose speculation.

It’s not speculation that government induced demand for higher education and a huge influx of easy money has disincentivized higher education institutions from containing costs.

Not sure which “forgiveness programs” you’re referring to, but the Public Service Loan Forgiveness Program requires borrowers to make 120 monthly payments before being eligible for forgiveness. It’s true that this will likely result in a large amount of forgiven loans, but not true that it’s encouraging people to “simply stop paying off their loans.”

This is not quite true. You only can get to this high of a number if you include the portion of borrowers still enrolled in school (in-school deferment) or those in income-based repayment programs entitled to make ‘$0 payments’ each month. Don’t forget, it’s widely believed the government makes a killing off the student loan program – booking $100+ billion in profits in just the past few years alone – and that’s including all the forgiveness programs.

Rick William Monroe
Rick William Monroe

F off jerk

No need for that type of comment at all.

There is a common misunderstanding regarding the student loan forgiveness program. By the time you receive student loan forgiveness, you have already paid back your loan a lot of interest. And even though you have made your payments monthly your principal has gone up. I will have paid about $30k in interest by the time my student loan is forgiven. The forgiveness is really only for more interest.

Ah, the feds at it again. Don’t want to give away money to middle-class students and families. Rather give it away to billionaire fat cats. What a perverse system. Imagine that the student loan lobby got their request yet once again.

Why should we give away money to anyone? The Fed and 8 years of 0% interest rates for the smoke and mirrors Obama economy has been nothing more than monetary crack. End the Fed

There are so few left in the middle class these days because everyone is trying to be middle class by borrowing things. When your house, 2 cars and boat are all loaned to you as well as $10K of credit card debt, you certainly aren’t middle class. Instead of investing their money, they give it to the banks. I would argue it isn’t just the rich’s fault – it’s mostly the stupid mindset of everyone else. Everyone is so desperate to get all the stuff they can’t afford, they spend their life making payments on cars and credit cards instead of making monthly deposits to their 401k and investment accounts

As I understand it, student loans cannot be forgiven. And one (plus any co-signers) could be on the hook until death. In super rare cases, a student death may allow the loan to be forgiven if the parent is elderly & unable to pay

If you consistently pay with a credit card, I suppose one could accumulate debt and then declare bankruptcy. Thus creating a work around way to get out of the student loan

I think the point being that the federal government loaning somebody $200k to obtain a fine arts degree is an exercise in idiocy, and that money will never be recouped regardless of bankrupcy clearing the debt or not.

Wrong, student loans can be forgiven and wiped out completely.

There are a number of forgiveness and discharge programs for federal student loans. The most common are tied to the income-based repayment programs (pay 10-15% of your discretionary income for 20-25 years and have the balance, which will be largely accumulated interest, forgiven. This is taxable income.) Public Service Loan Forgiveness (10 years of payments at a qualified non-profit to receive forgiveness) stacks with these programs and the forgiveness is not taxed. Some discharge programs are also tied to fraud (closed school discharge, false certification, etc).

You’re SOL for most private loans. To your point about bankruptcy with credit card debt, it’s not like that’s a particularly desirable or easy path, but something that is accessible only after years of hardship.

Actually, the email from my loan service says:

“We’re writing to you because our records show that within the past six months you’ve used a credit/debit card to make a student loan payment. On December 21, 2016, we were notified that per the U.S. Department of Treasury all federal student loan servicers can no longer accept credit card payments, effective January 1, 2017. We realize this may be an adjustment and we’re here to help in any way we can.

Great Lakes accepts payments made via:

Direct withdrawal from checking or savings accounts
Checks or money orders
Debit and prepaid credit cards…”

So prepaid credit cards are still included! Funny, getting 5-10% off of my student loans

Can you elaborate? How are you acquiring prepaid credit cards at a 5-10% discount?


Office Depot and Staples both frequently run a Visa or Mastercard Gift card promotion where you’ll get $15 off of $300 or more. Purchase these with Chase Ink or another 5% off card at office stores and you’ll be getting about 5% off after fees (just valuing UR points at 1 cent each).

There’s also Chase Freedom and Discover IT which have 5% quarterly at select types stores, so with fees you’ll be getting about 4% off (or 9% if you’re in the first year of Discover IT membership, since your cash back gets doubled).

Then there’s the American Express Blue Cash preferred which gives 6% back at grocery stores so you’ll be clearing 5% after fees.

I’m not aware of a way to perpetually acquire cards at 10% off though, if that’s what you were looking for, lol

This really sucks. I was hoping to apply for a handful of cards and pay off all 20k at once since I had the cash on hand anyway. I could have gotten a few hundred thousand reward points. No way now.

My federal student loan processor never took credit cards! I had no idea some did.

I have Navicat. How do I pay with a credit Card? Call in?

Yeah. You cannot do it online, but if you call them directly, you can. I just opened a Chase Ink plus and going to put 5k on my Navient loan. 10% off doesn’t seem too bad with the sign on bonus after spending 5k with the ink plus… But if you hurry, you still should be able to charge a chunk of your loan to a credit card. I’m thinking Citi double cash for 2%…

This seems like a blatant slap by the Feds. There is little reason to do this other than them trying to make it as hard as possible to repay student loans.

I suppose the credit card fees reduce the payment amount a little bit, but give me a fucking break. They’re already charging incredibly high interest rates.

I guess I’ll be using the CC-> gift card -> MO option to do my payments now.

Data Point: Paid my Federal Loans (serviced by Navient) with a credit card via phone yesterday (January 3, 2017).

another DP, i just called into navient and scheduled 32 monthly payments with cc. they allow up to 40 monthly payments. only reason i didnt do 40 was bc of my cc expiration date.

Let me add that the loans that were paid are private loans with navient. i also have fed loans with them, but did not ask about that since i’m on auto pay for the interest rate reduction and already know i cant pay any additional with cc.

If my student loan is with a company that accepts payment with credit card, will the payments count as cash advance or qualify for minimum spend requirements for bonuses?

I don’t think there is a universal answer to that question. It depends on how they code the transaction and how the credit card company processes it. With some banks, you can use a credit card to fund your new bank account. Some cards would recognize it as cash advance while others would process it as a purchase.

In some cases, you can set your cash advance limit to zero or $1, that way if the bank account codes it as a CA, the charge will be declined, it will go through if it codes as a purchase.

It gets more complicated with some banks (Chase?). They initially code it as a cash advance and later it posts as a purchase transaction. That means your cash advance limit must be more than the amount you are trying to put on the credit card and there will be a risk that it may end up posting as a cash advance.

This post is old, but I’m curious if anyone has tried using a balance transfer check to pay off student loans. If the loan service company refuses a check from the credit card bank, couldn’t one simply write the check to self and use the funds to pay the student loan? I have deposited balance transfer check funds into my own account a number of times with no problems. The borrower could not earn points on credit card this way and would have to pay the 3% (sometimes less) transfer fee. But if credit is good, doing this once a year onto a new 0% interest card would certainly beat paying 8 or 9 % interest on the student loan. Naturally, this option is only for someone with good credit who is on top of things and responsible. Missing payments or keeping the loan amount on the card past the 0% timeframe would be very expensive.

I haven’t sent the check in directly, but don’t see why you would pursue that route. If you have a credit card you likely have a checking account as well.

It would still cost the ~3% (transfer fee) and still wouldn’t earn points whether you cash it and pay the loan company or just sent the check in directly.

It may even be a worse plan. If you deposited the BT into your checking account and than used plastiq with a credit card that offsets platiq’s fee you would, in total, pay less than just mailing in a check.

Did you ever pursue this? I’m considering doing the same. I’ve been approved by the credit card company for a 0% balance transfer that would cover the remaining costs of my federal loan with Mohela. However, given my recent research, I’m concerned that Mohela will deny my balance transfer request, despite already being approved by the credit card company. If this happens, I’d like to pursue depositing the balance transfer check into my checking account and then paying off my student loan through my checking. Has any one else here successfully done this recently?

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