Are There Any Credit Card Rewards for Paying Off Student Loans?

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*This is a guest post by Jason Steele*

Credit cards are synonymous with incurring debt, not paying it off. And that’s no coincidence. It’s too easy for credit card users to get into serious debt when their credit card balance accumulates over time. As an unsecured debt that is never tax deductible, the costs of credit card interest payments can be staggering.

This is a post for people with student loans who may be able to use credit card rewards to help pay off their loans while using the cards for basic expenses and paying them off in full every month. However, for people who have a hard time avoiding the temptation of over-using the credit card, it doesn’t make sense to aim for credit card rewards of any kind — you’ll simply wind up with more debt.

And no matter what the rewards are, they are not worth going into debt! The last thing that people struggling with debt need is an incentive to spend more money. So if you’re working on paying off credit cards, feel free to stop reading now (instead, check out the Credit Card resource center).

However, for those who are comfortable using credit cards for certain monthly payments like gas, utilities, groceries, etc., it might make sense to get rewards when making those purchases. And if you have student loans, you can use some rewards to go towards extra student loan payments. One way to set this up would be to use the card for auto-paying certain recurring monthly payments and then set up a separate payment from your bank account to pay off the card in full every month (in such a scenario, you could even cut up the card itself so you’d have no way of using it for non-essential purchases).

With that said, here are a few examples of cards that offer rewards that can be used directly for loan repayments:

Sallie Mae World MasterCard from Barclaycard:  Sallie Mae is one of the largest providers of student loans, but it also offers a credit card that allows users to earn cash back towards the repayment of their loans. Cardholders receive 5% cash back on their first $250 spent each month on gas, groceries, and books, plus 1% cash back on all other purchases. Rewards can also be credited to a Upromise college savings account. There is no annual fee for this card.

Upromise MasterCard from Barclaycard:  Sallie Mae and Barclaycard also offer a Upromise World MasterCard that features different rewards for spending. Cardholders receive 5% cash back when making purchases through Upromise, 3% cash back for gas purchases at Exxon Mobil locations, and 1% on other purchases. Rewards can be deposited in a Upromise 529 college savings plan, a Sallie Mae high-yield savings account or as a payment towards an eligible Sallie Mae serviced loan. There is no annual fee for this card.

Citi ThankYou Rewards:  Citi has several different credit cards without annual fees that offer ThankYou reward points. Although these points can be redeemed for a variety of travel, merchandise, and gift cards, Citi also allows you to use your rewards to pay down a mortgage or student loan. Each point is worth one cent each towards loan repayment options, and the loan can be held with any bank, not just Citi. Cardholders simply call the ThankYou rewards customer service center to request a loan repayment award, and Citi will issue a check to the institution specified.

While these cards may only be useful to a certain subset of the population (i.e. people with student loans who are comfortable using their card for monthly expenses) it can be a useful strategy for them – and could help speed up their student loan repayment. If you have any questions about this topic – or about credit card rewards in general – please put them in the comments section below and we’ll do our best to answer them.

Jason Steele is a full time freelance blogger who is an expert on credit cards and reward travel. He writes about credit cards and travel for The Card Journalist and several other leading personal finance sites.

Image Credit: Stephan Gayer

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  • Solace

    I use a rewards card for all my regular expenses, and use the reward money to pay for more of those same expenses, like groceries. I don’t use it for my student loans, though. I use the direct deposit option because of the lowered interest rate deal. I wonder at what loan balance and remaining repayment period one or the other of those becomes the better deal?

    • Sounds like you have a good system! As for your question, that’s a good one – I have to admit I’m not sure of the answer. I think in general, though, using the direct deposit and getting the lower interest rate is definitely a good idea.

  • Melissa Gowers

    When you say Sallie Mae does this appy to MOHELA as well?

    • Hi Melissa, not that I’m aware of, no. However, it might be worth researching further.