Making extra student loan payments with a rewards credit card

[LauraL]

I just made quite a discovery that I think could be helpful to anyone paying off student loans.

The most important thing about this post: I do not carry a credit card balance; I pay my statements in full every month.

As a recent college graduate, I'm aggressively paying off my student loans; on top of my mandatory monthly payments, I directly contact my lender (Great Lakes) to make large payments to individual loans. Until last week, I was making these secondary payments directly from my savings account, but I just discovered that such individual non-recurring payments may be made on a credit card! This new strategy will help me pay off my loans and will also acrue rewards points on my credit card.

For any other mustachians who are paying off student loans and don't carry any credit card debt, this is a great win-win strategy!

[AK]

Laural, that's really helpful to know. Thank you.

This can help with meeting spending limits while doing credit card churning. One thing I'm exploring is if I can use a service such as BlueBird to pay for my student loans. The idea is to sign-up for reward cards, buy various cash equivalents with said credit cards, transfer the money to bluebird, pay your bills through blue bird and then pay your credit card(s) off in full. I'm just getting into Travel Hacking so I'm going to start small and build up to this. I don't plan to manufacture spending until I'm comfortable with how things work.

[MoneyRx]

I contacted my loan provider (federal govt->sallie mae->navient) about this when I graduated and they only allow the actual payment that is due to be paid by credit card and only over the phone. So there's not really much benefit to using a card if you want to pay off your loans ahead of time.

[AK]

I contacted my loan provider (federal govt->sallie mae->navient) about this when I graduated and they only allow the actual payment that is due to be paid by credit card and only over the phone. So there's not really much benefit to using a card if you want to pay off your loans ahead of time.

I thought the same way until I recently started learning about Travel Hacking and BlueBird. BlueBird is an AMEX prepaid debit card that also has check paying and bill pay capabilities. I just signed-up for BlueBird and haven't done this yet but the process to pay your student loans with a credit card can be done indirectly.

It goes like this:

  1) Purchase Visa gift cards via credit card(s).
  2) Go to walmart and transfer money from gift cards to BlueBird.
  3) Pay Student loans and other bills with BlueBird bill pay.
  4) Pay credit card(s) off in Full.

Disclaimer
I haven't done this yet and have only ready about it. Doing this has transaction costs like going to Walmart periodically and other stores as well as gift card purchasing fees. However, the primary reason to do this is to earn credit card rewards such as cash back and mileage / points. This also helps to meet various credit card spending requirements needed to acquire the sign-up bonuses which are often very worthwhile. I plan on taking this slow by just paying off little bills like utilities and cable and other minor things first and go from there. The most important thing to consider if you explore this is being able to payoff the credit card(s) in full every month so no interest is accrued. Otherwise, it's not worth doing it.

[kpd905]

Wow, wish I would have known this when I was with Great Lakes.  However, I was buying Visa gift cards at Kroger and paying my student loans with Evolve money.  It was roughly $24 profit per $500 Visa gift card using the Amex Blue Cash Preferred card that gives 6% back at grocery stores.

Unfortunately, Evolve Money now only allows one payment per month to any business.

[garth]

As a recent college graduate, I'm aggressively paying off my student loans; on top of my mandatory monthly payments, I directly contact my lender (Great Lakes) to make large payments to individual loans. Until last week, I was making these secondary payments directly from my savings account, but I just discovered that such individual non-recurring payments may be made on a credit card! This new strategy will help me pay off my loans and will also acrue rewards points on my credit card.

Can you explain how you did this? I don't see an option on the Great Lakes website for a credit card payment (actually, the faq says they do not accept credit cards). I'm guessing you call them to make these payments?

[LauraL]

As a recent college graduate, I'm aggressively paying off my student loans; on top of my mandatory monthly payments, I directly contact my lender (Great Lakes) to make large payments to individual loans. Until last week, I was making these secondary payments directly from my savings account, but I just discovered that such individual non-recurring payments may be made on a credit card! This new strategy will help me pay off my loans and will also acrue rewards points on my credit card.

Can you explain how you did this? I don't see an option on the Great Lakes website for a credit card payment (actually, the faq says they do not accept credit cards). I'm guessing you call them to make these payments?

Hi Garth,

You can only use your credit card to make "one-time payments" (that is, not your mandatory, recurring monthly payment). I call them and tell them that I want to make a one-time payment (I put the money toward specific loans, but you could let them choose where it goes, if you want), and tell them I want to pay with a credit card. Very easy! The critical thing to note is that you cannot make your mandatory monthly payments with a credit card.

[Blonde Lawyer]

Did they charge you a fee to use the credit card?

[LauraL]

Did they charge you a fee to use the credit card?

Nope! All you do is call and tell them you'd like to do a one-time credit card payment. If there's a specific loan you want the payment applied to, you tell them which loan (they refer to "tokens". they'll make a note of this request, but you'll have to call back after the payment has posted about a week later and make sure they apply it to the specified loan). Super easy and no fees involved! I've paid off about $13,000 in the last 5 months this way.

[clarkfan1979]

About 3 years and 2 months ago I started paying off my student loan balance of $56,500. Approximately 15,500 was at 2.08% and 41,000 at 6.55%. If I signed up for the 10 year standard plan, I would be paying the average rate of my two loans and the payment would be around 595/month. Instead I signed up for the 25 year plan. My payment is 333/month and I pay an extra 250 a month toward the 6.55% loan. I should average an extra $300/month for this year.

I just called today and changed to the graduated 25 year plan. My monthly payment dropped to $229/month and now my goal is to pay an extra 400/month toward the 6.55% loan. The monthly payment for the graduated plan will increase every 2 years. In two years it will increase to 256, then in another two years to 289, then to 319 and 356. The current goal is to pay off the 6.55% loan in 5 years.

This helps pay off the higher interest rate loan faster. It wont' save much, but it doesn't involve much effort besides a phone call.

[nathan01xl]

I can confirm that this works with Great Lakes. Just need to be current on your payments and do it over the phone. You can designate which specific loans the payment goes to after payment has processed.

[onecoolcat]

Anyone know if this works with Sofi?

[kpd905]

Anyone know if this works with Sofi?

No luck.  I just called TruStudent and they only let you pay with checking or savings, even over the phone.

I thought maybe since they charge you $5 to pay over the phone they would allow a credit card.

[nathan01xl]

That is too bad, I find it strange that Great Lakes is the only company which allows customers too pay that way.

I am actually signing up for a Capital One Quicksilver to pay my remaining balance, 0% til 2016 and 1.5% cash back. Will net me $250 in rewards with sign up bonus and will save around $450 in interest vs paying off by end of year traditionally. Everyone who is having their loans serviced by Great Lakes should be doing this. My concern would be too many people doing it and they stop allowing it because it likely costs them money.

[cashstasherat23]

I contacted my loan provider (federal govt->sallie mae->navient) about this when I graduated and they only allow the actual payment that is due to be paid by credit card and only over the phone. So there's not really much benefit to using a card if you want to pay off your loans ahead of time.

I have navient as well and they actually do accept extra payments via credit card. The key is that you can only pay up to the amount of your monthly payment and not a cent more so your customer service person may have been confused.
I do this every month, along with my auto bill pay. Just make sure that they know it is an extra payment, and be very specific/ollow up to make sure they get it right if you want it applied to one loan in particular. I believe you can make several payments a month this way, just have to wait for one to clear before you do another.

[handsnhearts]

Does bluebird still exist?   I read somewhere it was gone. (You can believe everything on the internet)

[HipGnosis]

Not only is BlueBird still going, but AmEx has a very similar program with Target called RedCard.

[SantaFeSteve]

I contacted my loan provider (federal govt->sallie mae->navient) about this when I graduated and they only allow the actual payment that is due to be paid by credit card and only over the phone. So there's not really much benefit to using a card if you want to pay off your loans ahead of time.

I thought the same way until I recently started learning about Travel Hacking and BlueBird. BlueBird is an AMEX prepaid debit card that also has check paying and bill pay capabilities. I just signed-up for BlueBird and haven't done this yet but the process to pay your student loans with a credit card can be done indirectly.

It goes like this:

  1) Purchase Visa gift cards via credit card(s).
  2) Go to walmart and transfer money from gift cards to BlueBird.
  3) Pay Student loans and other bills with BlueBird bill pay.
  4) Pay credit card(s) off in Full.

Disclaimer
I haven't done this yet and have only ready about it. Doing this has transaction costs like going to Walmart periodically and other stores as well as gift card purchasing fees. However, the primary reason to do this is to earn credit card rewards such as cash back and mileage / points. This also helps to meet various credit card spending requirements needed to acquire the sign-up bonuses which are often very worthwhile. I plan on taking this slow by just paying off little bills like utilities and cable and other minor things first and go from there. The most important thing to consider if you explore this is being able to payoff the credit card(s) in full every month so no interest is accrued. Otherwise, it's not worth doing it.

I have actually been doing this with my Navient student loans- although I am using the Target Redcard.  It works.

[thenewnorm]

Here's what I did today. I used my chase sapphire preferred card to purchase a Reloadit pack at the grocery store (it did cost me 503.95 to get a $500 pack). Then I used Evolve money to pay my student loan servicer, which is Fedloan Servicing. I'm still waiting for the payment to post but I'm not expecting any problems.

[nathan01xl]

Paid my loan off in full today with Great Lakes! Customer service lady seemed really confused when I told her I would be putting the 8k on a credit card but no issues lol.

[kpd905]

Paid my loan off in full today with Great Lakes! Customer service lady seemed really confused when I told her I would be putting the 8k on a credit card but no issues lol.

Wow, good deal.  I'd probably grab a Barclays Arrival+ card to get $600+ out of that payment if I did that.

[The_Crustache]

Cha CHING

damn this is some really good info
::wrings hands greedily::

[LauraL]

Paid my loan off in full today with Great Lakes! Customer service lady seemed really confused when I told her I would be putting the 8k on a credit card but no issues lol.

Congratulations! Double win :)

[handsnhearts]

About 3 years and 2 months ago I started paying off my student loan balance of $56,500. Approximately 15,500 was at 2.08% and 41,000 at 6.55%. If I signed up for the 10 year standard plan, I would be paying the average rate of my two loans and the payment would be around 595/month. Instead I signed up for the 25 year plan. My payment is 333/month and I pay an extra 250 a month toward the 6.55% loan. I should average an extra $300/month for this year.

I just called today and changed to the graduated 25 year plan. My monthly payment dropped to $229/month and now my goal is to pay an extra 400/month toward the 6.55% loan. The monthly payment for the graduated plan will increase every 2 years. In two years it will increase to 256, then in another two years to 289, then to 319 and 356. The current goal is to pay off the 6.55% loan in 5 years.

This helps pay off the higher interest rate loan faster. It wont' save much, but it doesn't involve much effort besides a phone call.

This is great. Do you know how to calculate the difference in interest using each method?

[rageth]

I'm a new Mustachian and still trying to find ways to grow my money mustache.  My loan servicer is through Great Lakes, and I just signed up for my first cash back rewards card, the Citi Double Cash Back card with the 0% APR for 15 months.  I have $5100 left on a 5.35% interest loan through GL, and my minimum payment is $61.  I've been paying $100/month through a checking account on auto-pay. 

If I'm understanding this right, though, I can cancel my auto-payments through Great Lakes (losing the .25% interest rate reduction is not concerning with only $5100 left on the loan) and then call them up and say I want to make an early payment and say I want to pay $1400 (to continue the $100/month for 14 of the 15 month of 0% APR).

My account says that I owe $0 at the next due date because I've been paying extra down each month, so I'm taking that to mean that I do not have to make the monthly minimum payment as it says that the total due is $0.00.  Does that make sense?

[LauraL]

I'm a new Mustachian and still trying to find ways to grow my money mustache.  My loan servicer is through Great Lakes, and I just signed up for my first cash back rewards card, the Citi Double Cash Back card with the 0% APR for 15 months.  I have $5100 left on a 5.35% interest loan through GL, and my minimum payment is $61.  I've been paying $100/month through a checking account on auto-pay. 

If I'm understanding this right, though, I can cancel my auto-payments through Great Lakes (losing the .25% interest rate reduction is not concerning with only $5100 left on the loan) and then call them up and say I want to make an early payment and say I want to pay $1400 (to continue the $100/month for 14 of the 15 month of 0% APR.

My account says that I owe $0 at the next due date because I've been paying extra down each month, so I'm taking that to mean that I do not have to make the monthly minimum payment as it says that the total due is $0.00.  Does that make sense?

I wouldn't cancel your autopay. Keep letting the autopay deduct your minimum payment from your bank account, then call in when you want to make extra payments and pay those on top of your automatic monthly payments (this is exactly what I do).

When I call Great Lakes, I tell the representative that I would like to make an extra payment using a credit card. The rep will then transfer you to a credit card teller for your respective card type (MasterCard, Amex, etc.), you'll tell them how much you want to pay, your credit card info, and then you're done!

Good luck, and congrats!

[Tami1982]

I use my Target Prepaid card to do this.  No fees associated.  I load the card with my credit card and then use the online bill pay function of the target card to pay a principal payment.  Doing this on car, mortgage, and loan!  OH THE MILES!  :)

[chicagomeg]

Does anyone have loans serviced w/Nelnet who has tried this?

[kpd905]

I use my Target Prepaid card to do this.  No fees associated.  I load the card with my credit card and then use the online bill pay function of the target card to pay a principal payment.  Doing this on car, mortgage, and loan!  OH THE MILES!  :)

Can't you just use it to pay the credit card though?  So the student loan and mortgage payments are not necessary.

[immocardo]

About 3 years and 2 months ago I started paying off my student loan balance of $56,500. Approximately 15,500 was at 2.08% and 41,000 at 6.55%. If I signed up for the 10 year standard plan, I would be paying the average rate of my two loans and the payment would be around 595/month. Instead I signed up for the 25 year plan. My payment is 333/month and I pay an extra 250 a month toward the 6.55% loan. I should average an extra $300/month for this year.

I just called today and changed to the graduated 25 year plan. My monthly payment dropped to $229/month and now my goal is to pay an extra 400/month toward the 6.55% loan. The monthly payment for the graduated plan will increase every 2 years. In two years it will increase to 256, then in another two years to 289, then to 319 and 356. The current goal is to pay off the 6.55% loan in 5 years.

This helps pay off the higher interest rate loan faster. It wont' save much, but it doesn't involve much effort besides a phone call.

This is great. Do you know how to calculate the difference in interest using each method?

2.08% Vs. 6.55%

Basically for each dollar saved it is a 4.47% Return each year

In the first case he is paying an extra 250 per month.

This is roughly 11$ over the course of a year for one months payments or 132$ per year.

Obviously this is more complicated because it is a yearly return, but it gives a rough estimate

[Tami1982]

I use my Target Prepaid card to do this.  No fees associated.  I load the card with my credit card and then use the online bill pay function of the target card to pay a principal payment.  Doing this on car, mortgage, and loan!  OH THE MILES!  :)

Can't you just use it to pay the credit card though?  So the student loan and mortgage payments are not necessary.

If you load the card with $700 and then pay $700 (for example) directly back on it, it looks like "abuse" to them.  You have to shift it around a little to churn miles or the card company will just block you.  So I load a weird amount on my Target Prepaid card every month like $712.15 or or something from my credit card that earns me miles, and then use the Target bill pay to pay mortgage, student loan, car payment.  I use my income from my bank account to pay credit card off.  If I was higher income I would load a higher amount each month (can load up to $5,000 a month) but I'm not so I load what I can to earn what miles I can.

[Uncle Scrooge]

I'm not too familiar with the Target prepaid card, but I just did a quick Google search and it says you can withdrawal any money you have on it from an ATM for no fees.

What would stop me from loading the max on there with my credit card (I can load using a CC, correct?), which I believe is $5,000...and then slowly withdrawing money at an ATM throughout the month?

I have the Citi DoubleCash card which gives me 2% on all transactions. So 5k would be $100 of free money each month....

[Uncle Scrooge]

I just went on Target's Prepaid Redcard website, and I don't believe credit cards are an acceptable way to deposit funds. It says cash in store can be loaded, direct deposit from work, and debit cards (not CC).

Am I looking in the wrong place?

[tjrssibelle]

I just went on Target's Prepaid Redcard website, and I don't believe credit cards are an acceptable way to deposit funds. It says cash in store can be loaded, direct deposit from work, and debit cards (not CC).

Am I looking in the wrong place?

It can be loaded with a credit card; I've used the Barclay arrival and discover to load it. Discover did reject the charge the first time but after confirming that I was the one doing the purchase, I was able to load the Redcard at another target on the same day.

[Shenzhenigans]

Does anyone have any tips for someone who consolidated with Navient and not Greatlakes? They're telling me I'm unable to change when I call.

[SantaFeSteve]

Does anyone have any tips for someone who consolidated with Navient and not Greatlakes? They're telling me I'm unable to change when I call.

My loans are with Navient and I use my Target Redcard's online Bill Pay feature to make additional payments to my student loans. 

What are they telling you you are unable to change?

[Tami1982]

I just went on Target's Prepaid Redcard website, and I don't believe credit cards are an acceptable way to deposit funds. It says cash in store can be loaded, direct deposit from work, and debit cards (not CC).

Am I looking in the wrong place?

It says that on the website, but in practice they accept them.  I've loaded with two different CC, no issue.

I'm not too familiar with the Target prepaid card, but I just did a quick Google search and it says you can withdrawal any money you have on it from an ATM for no fees.

What would stop me from loading the max on there with my credit card (I can load using a CC, correct?), which I believe is $5,000...and then slowly withdrawing money at an ATM throughout the month?

I have the Citi DoubleCash card which gives me 2% on all transactions. So 5k would be $100 of free money each month....

Nothing as far as I can see.  ATM w/d are free right next to the customer service desk.  And because it's not a cash advance, you are not limited in the amount.  I don't think you can do $5,000 at once, but $2,500 in two visits per month?  Anyone else chime in here?  I've always done smaller amounts because that's what I can pay off.

[Shenzhenigans]

Does anyone have any tips for someone who consolidated with Navient and not Greatlakes? They're telling me I'm unable to change when I call.

My loans are with Navient and I use my Target Redcard's online Bill Pay feature to make additional payments to my student loans. 

What are they telling you you are unable to change?

I'm wanting to change from Navient to Mygreatlakes to make the cc payments via phone. They're saying you can only consolidate once though and not change afterwards. I could do the target red card, but I'm living abroad right now and don't want to ask my family do that for me. I'm looking for any loopholes, tricks, or backdoors to changing over.

[SantaFeSteve]

Does anyone have any tips for someone who consolidated with Navient and not Greatlakes? They're telling me I'm unable to change when I call.

My loans are with Navient and I use my Target Redcard's online Bill Pay feature to make additional payments to my student loans. 

What are they telling you you are unable to change?

I'm wanting to change from Navient to Mygreatlakes to make the cc payments via phone. They're saying you can only consolidate once though and not change afterwards. I could do the target red card, but I'm living abroad right now and don't want to ask my family do that for me. I'm looking for any loopholes, tricks, or backdoors to changing over.

Not sure about changing servicers.  I was able to make credit card payments over the phone through Navient but only for the current amount due.  Since I am trying to pay additional principal I needed to find another way. If you are only looking to maximize your miles by paying your regular payment with a CC you should be able to do that, but you have to call them to do it, you can't use your cc online.
Good luck.

[Shenzhenigans]

Yep. My current monthly payment would have me indebted for...eternity. Was hoping to pay it off a lot quicker AND generate rewards. Thanks for your thoughts!

[Tami1982]

I'm sorry getting a red card would be difficult - I understand - I had to order one off ebay!  But I'm using it to make principal payments as well.  I simply load the red card w/ the CC with however much I want to pay extra and then use the red card to make the principal payment with their bill pay and "principal payment" noted in the memo.  Then pay off the CC.

[charis]

Cross posting with another thread re Target prepaid redcard:  How long does the bill pay feature take to deliver a payment?  How long does it take for money to hit your bank account if you withdraw it from Redcard?

Thanks!

[Tami1982]

Cross posting with another thread re Target prepaid redcard:  How long does the bill pay feature take to deliver a payment?  How long does it take for money to hit your bank account if you withdraw it from Redcard?

Thanks!

In my experience, bills post within four days (that's the longest it's ever taken over a weekend.)  I've never transferred cash out of the red card - only on to it. 

[nanu]

Transferring money out of a Target REDcard takes a day or so - I took out some money yesterday and it's already in my bank account today.
It's possible that with other banks it'll take a bit longer, but shouldn't be more than a few days at most anyway.

[onecoolcat]

So, if I order a Target Prepaid RedCard, I can use my credit card to load it (not as a cash advance) and I can then call my Sofi servicer and pay use it to make additional payments and get my 1-2% cashback on my credit card?

[Tami1982]

So, if I order a Target Prepaid RedCard, I can use my credit card to load it (not as a cash advance) and I can then call my Sofi servicer and pay use it to make additional payments and get my 1-2% cashback on my credit card?

I do not know if Sofi accepts cards for payment - they could run it as a debit though.  But if not, you just use the online Target portal to bill pay just like your bank and send them a payment to the principal.  You'd still get your cashback as it pulls as merchandise and not cash advance.

[kindviking]

We've been slaying student loans debt like this as well. To maximize your returns, I'd suggest organizing your extra payments into quarterly lump transactions. This way you can get a new rewards credit card per quarter, generate the spending needed and pocket the sign-up bonus. If you have a spouse, you can double this. Mrs KV and I get two credit cards per quarter for this, pay about $4k in student loans on each ($8k total) and generate about $400 per card ($800 total per quarter). This is how you can generate ~$3,200 / year in free money. The "return" on airline points is much higher than cash (we spent about $8k on student loans and generated $2,500 in free travel), but travel only goes so far in my opinion. At some point, I'd rather have cash :)

[Shenzhenigans]

Just a heads up for anyone who's currently consolidated with Navient. I just finished making my monthly minimum cc payment and the woman said "there is a rumor" that Navient is supposed to be starting up with an online additional payment via cc option. She felt sure enough in this rumor to repeat it without prompt on three separate occasions on the phone. So be on the lookout, she said it should be starting up any day now!

[SantaFeSteve]

Just a heads up for anyone who's currently consolidated with Navient. I just finished making my monthly minimum cc payment and the woman said "there is a rumor" that Navient is supposed to be starting up with an online additional payment via cc option. She felt sure enough in this rumor to repeat it without prompt on three separate occasions on the phone. So be on the lookout, she said it should be starting up any day now!

That would be huge.  I have wasted more hours of my life than I care to remember on the phone with them and being able to simply make that payment online would make me very happy.

[warder]

Thanks for the tip!  Just made a huge extra payment and in the process banked 81,500 AMEX points. Huge sign-up bonus!  Super easy. 5 minute phone call.  My loan, but we used my husband's new card, and that was no problem either.

Also, we are always on the look-out for 0% balance transfer offers through our credit cards. Barclays arrival just had one for 0% for a year, with a 1% transaction fee. We did it.  Much cheaper than the 6% I was paying...