Is it Possible to Transfer Student Loans to a Zero-Interest Credit Card?
Transferring student loans to a zero-interest credit card may seem attractive, but it isn't always possible, and there are financial risks. Learn more here.
While your federal student loans are on pause until the end of 2022, your private student loans aren’t. Whatever your financial situation, it can be frustrating to see just how much interest you’re paying. You may, however, be able to lower your payment significantly by transferring some or all of your balance to a zero-interest credit card.
Sure, not paying interest sounds attractive, but transferring your loans to a credit card comes with financial risk, and it’s important to understand the pros and cons as well as the process.
Is It Possible to Transfer My Student Loan Balance to a Credit Card?
The truth is that it's not always possible to pay your student loans using a zero-interest credit card. Even if a credit card issuer allows it, your student loan servicer may not. In most cases, you won't be allowed to do so due to federal regulations. Plus, your loan servicer may not want to pay the processing fees that are required.
You may, however, be able to pay your loan by conducting a credit card balance transfer. That’s where you get a credit card issuer to pay off your student loan balance, and the amount you’ll owe will appear on your credit card instead. Effectively, you’re transferring your student loan balance from one account to another.
Does It Make Sense for Me to Do a Balance Transfer?
Even if your credit score is good enough for you to qualify for a credit card, a balance transfer might not make sense. While most credit cards allow you to conduct a balance transfer, that doesn’t mean the interest rate is worth it.
Before you transfer your student loan balance, look at the credit card’s balance transfer APR. Is it significantly lower than what you’re currently paying in interest for your loans? If you have a zero-interest credit card, it might make sense. Otherwise, it might not be worth it, as you’ll have to pay a balance transfer fee.
For most credit cards, you’ll pay a 3% to 5% balance transfer fee. So, for example, if you’re transferring $15,000 in student loans, you could pay anywhere from $450 to $750 in fees. You’ll need to save more than that in student loan interest (including what you’ve already paid) for it to be worth the hassle.
Don’t forget, if you do qualify for a zero-interest credit card, you’ll enjoy that APR for only a fixed period of time, often between 12 and 18 months.
Think carefully about whether you can pay off the loan balance before the introductory period ends. If not, you could be stuck with credit card debt at a much higher interest rate than your student loan debt and pay more for your loan overall than you had originally intended.
Of course, even if you want to conduct a balance transfer, that assumes your credit card issuer will allow such a transaction. In some cases, issuers will not allow student loan transfers.
You also may not be able to transfer your entire student loan balance even if your credit limit is high enough. That’s because credit card issuers may have different limits for balance transfers. In that case, you’ll still be paying interest on any remaining balance with your student loan lender, and it might be difficult to juggle two loans, which is something else to keep in mind.
If you’re almost at the end of your student loan repayment and don’t have a large balance, it could make sense to transfer the remaining balance to a zero-interest credit card. Of course, you’ll want to make sure you can pay off your loan balance without stretching your budget too thin in order to ensure you’re not risking a late payment and that you can save money on interest.
How to Conduct a Balance Transfer to a Credit Card
If you’ve decided you want to conduct a credit card balance transfer, know that each issuer may have different protocols. That being said, here are the general steps you’ll need to take:
- Research and open a new credit card: You'll want to pick a credit card that has features that are important to you, such as cash-back rewards or purchase protection. Also note what you'll need to qualify; in many cases, you'll need to have excellent credit. After you shop around, apply for the card you want. Once your application is approved, you can proceed.
- Get documentation: Having all the necessary information ready can help speed up the transfer process with your credit card issuer. You’ll need the balance transfer amount and your student loan records, and you’ll want to review the balance transfer process for the issuer.
- Reach out to your credit card company: Contact customer service and say you want to request a balance transfer. At this point, representatives will ask for any relevant details and point you to the next steps. Make sure to follow them and get confirmation that the transfer has been posted. That can take a few weeks, though each credit card issuer has its own timeline. Don't forget to also get confirmation from your student loan servicer that the balance transfer is complete. While you’re waiting, you should keep making payments to your student loan servicer; otherwise, you’ll risk missing or being late on your payment.
- Pay down your new balance: Now that the balance transfer is complete, have a plan in place to pay it all off before the introductory period is over.
If a student loan balance transfer to a credit card isn’t right for you but you want to save money on your student loans, consider refinancing with Juno. You could save you hundreds or even thousands of dollars in total interest.
Sarah Li Cain
Sarah Li Cain is a finance writer and a candidate for the Accredited Financial Counselor designation whose work has appeared in places like Bankrate, Business Insider, Financial Planning Association, Investopedia, Kiplinger, and Redbook. She’s the host of Beyond The Dollar, where she and her guests have deep and honest conversations about money affects their well-being.
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