Best Credit Card to pay off student loans

Last Updated on July 3, 2024 by NAMS Editor

With rising costs of higher education, many students find themselves saddled with substantial student loan debt after graduation. While it may take several years to pay off your loans, choosing the right credit card can help maximize your payments and make the process a bit more manageable. In this post, we’ll explore some of the top credit cards on the market designed to help with student loan repayment through sign-up bonuses, cash back programs, and other perks. By the end, you’ll have a good idea of which card is best suited for your individual situation and repayment goals.

Student Loan Repayment Options

Before diving into specific credit card recommendations, it’s helpful to briefly cover standard student loan repayment options. The most common plans include:

Standard Repayment – With this option, you’ll pay a fixed monthly amount for up to 10 years. Payments are applied first to interest and then to principal. This plan minimizes total interest paid but results in the highest monthly payments.

Graduated Repayment – Monthly payments start out low and gradually increase every 2 years. Interest continues to accrue on the outstanding balance. This plan stretches payments out for up to 10 years.

Extended Repayment – Eligible for higher student loan balances, this option extends payments up to 25 years. As with graduated repayment, monthly payments are lower initially but increase over time. Interest continues to accumulate.

Income-Driven Repayment – Monthly payments are capped at a portion of your discretionary income (10-20% depending on the specific plan) and any remaining balance is forgiven after 20-25 years. This is best for those with high debt and low incomes.

Refinancing – Consolidating federal and/or private loans into a new private loan at a lower interest rate. This can lower your monthly payments but you lose federal protections like income-driven repayment.

Knowing your options is important when choosing the best credit card strategy. Some cards even allow you to earn rewards on your student loan payments.

Top Credit Cards for Student Loan Repayment

With the landscape in mind, here are some of the top credit card options for paying off student loans:

Chase Sapphire Preferred

The Chase Sapphire Preferred is one of the most versatile rewards cards on the market and a great choice for earning bonuses on student loan payments. New cardholders can earn 60,000 bonus points after spending $4,000 in the first 3 months – worth $750 when redeemed for travel through Chase Ultimate Rewards.

You’ll earn 2x points per dollar on travel and dining and 1 point per dollar on all other purchases. Points are worth 25% more when redeemed for travel through Chase, making them very valuable. Paying student loans counts as purchases, so you can earn rewards while chipping away at your balance. There is a $95 annual fee, but the sign-up bonus more than offsets this.

Capital One Venture Rewards Credit Card

Like the Chase card, the Capital One Venture Rewards earns 2 miles per dollar on every purchase. Miles can be redeemed as statement credits to put toward loan balances. New applicants get 60,000 bonus miles after spending $3,000 within 3 months, worth $600 in travel.

There is no annual fee for the first year, then $95, which is waived for the first year as part of the sign-up offer. Capital One miles don’t expire as long as your account remains open and active. This card works well for consistent spend like loan payments.

Wells Fargo Autograph Card

An exciting new option is the Wells Fargo Autograph Card. Earn 30,000 bonus points (worth $300 in travel) after spending $3,000 in the first 6 months. You’ll earn 3x points on dining, travel, gas stations, rideshares and transit, and 1 point per dollar on other purchases. Points are worth 1.5 cents each for a $45 value and are redeemable for student loan payments as cash back.

What sets this card apart is the cell phone protection benefit. Wells Fargo will refund up to $600 if your phone is damaged, stolen or lost each year. No annual fee applies. This is a great choice if you use your phone a lot and want flexible rewards.

Discover it Student Cash Back

For straightforward cash back on loan payments, the Discover it Student Cash Back card earns 5% back at different places each quarter like grocery stores, gas stations and rideshares when you activate bonuses. Outside of bonuses, you earn 1% on all other purchases. Plus, Discover matches all the cash back you’ve earned at the end of your first year. There are no annual or foreign transaction fees.

This card helps stretch limited budgets and works well for those on income-driven plans looking to maximize each payment. Discover requires excellent/good credit, minimum income $500/month, and the applicant must be a full-time student.

American Express EveryDay® Credit Card

The American Express EveryDay card stands out for unique benefits for those in school or with student debt. It offers 30,000 Membership Rewards points after $3,000 spend in 6 months. That’s enough for a $300 airline credit or gift cards. You’ll earn 2x points at U.S. supermarkets on up to $6,000 per year in purchases and 1x point on other eligible purchases.

What makes this card an especially good fit is the ability to pause billing cycles while in college. You can request American Express stop billing temporarily up to 48 months while studying. This helps manage payments smoothly during busy academic periods or job changes. There is no annual fee.

Factors to Consider

When deciding which credit card is best for your student loan repayment plan, consider:

• Loan type (federal vs private) – Federal loans qualify for protections like income-driven repayment that aren’t available for private loans.
• Credit score – Apply for cards that accept fair-to-good scores of 670 or higher if you’re starting out.
• Spending habits – Match rewards categories to your natural expenses like dining, gas or transit to earn back the most.
• Repayment goals – High balances may benefit from 0% APR promotions, while consistent small payments work well with straightforward cash back.
• Budget – Factor in annual fees versus sign-up bonuses and rewards potential to maximize your net gains.

Choosing the card with the best overall benefits and rewards for your specific financial situation will make the repayment process smoother. Be sure to pay balances in full each month to avoid interest charges.

Additional Tips for Maximizing Rewards

A few extra tips can help maximize the value you get from rewards credit cards:

• Use card for all spending – This boosts your rewards earnings significantly versus occasional use. Just pay it off each month.
• Target spending for bonuses – Use the right card at the right stores each quarter to take advantage of rotating bonus categories.
• Referral bonuses – Cards like Chase Sapphire offer up to 50,000 extra points for each successful referral. This pads your earnings substantially.
• Redeem wisely – Know the best ways to redeem points and miles, like using the Chase Portal or transfer partners for maximum value from travel redemptions.
• Combine with other rewards programs – Link credit cards to loyalty programs from airlines, hotels, and merchants to multiply earnings.
• Negotiate student loan interest rates – Ask servicers politely if they can lower your rate, then put savings toward principal more aggressively.

Maximizing credit card perks lets you pay down your loan balance more quickly while getting real financial value back along the way. With a smart strategy, you may even fund future travel using points from repayments.

Wrapping Up

To summarize, the best credit card for student loan repayment depends on factors like your loan type and balance, credit profile, spending patterns, and overall financial goals. But among the top options highlighted here, the most versatile choice for earning rewards on a variety of expenses would be the Chase Sapphire Preferred or Capital One Venture Rewards cards.

The Discover It Student Cash Back is ideal for simplicity and budget management with its rotating 5% categories. Meanwhile, the American Express EveryDay provides unique benefits well-suited for full-time students still in school or transitioning careers.

Whichever card you choose, focusing spending into rewarding categories and taking advantage of sign-up bonuses and referrals can help offset the cost of student loan interest over time. Just be sure to use credit responsibly by paying statements in full each month to avoid interest charges. With smart use of rewards, you’ll accelerate your debt repayment and get closer to financial freedom.