Can You Refinance Your Student Loan with a Balance Transfer Credit Card

June 20, 2019

By Sherry Keyles

If you are struggling to pay back your student loan, you have good company. With the cost of college skyrocketing, the only way most Americans can afford college is with a student loan. However, due to high interest rates, the amount you have to pay back is substantially higher than when you took out the loan.

Federal loan interest rates are adjusted annually so the rate you paid your freshman year in college is different from your senior year. The rate varies depending on whether you have a federal or private loan and whether the interest rate is fixed or variable. Currently, the student loan interest rate can run from 4.81% to 7.44%, with the average at 6%.

Is there anything you can do to reduce your student loan debt? While there are a few options to try and reduce your debt, there's one option you may not have considered - a balance transfer credit card.

Balance Transfer Credit Card Basics

A balance transfer credit card allows you to transfer high-interest debt to a credit card with a 0% introductory APR for a specified period of time (currently 12-21 months). With a 0% APR, your payments go directly toward the principal of the balance for the specified period. For example, if you had debt of $2,000 on a credit card but were paying an APR of 16%, you would be paying an extra $320 per month in interest, meaning your monthly payment would be around $500 a month.

By transferring the debt to a new card with a 0% introductory APR offer for 12 months, you would save yourself the interest and just pay a monthly payment of $133. Many cards offer longer APRs, meaning you could reduce your monthly payment further and still pay the debt off faster.

The most important thing with a balance transfer card is to pay off your balance before the 0% APR period ends. Otherwise, your interest rate could go up to 20% and negate any benefits from the balance transfer card.

How Refinancing with Balance Transfer Works

Using a balance transfer to refinance your student loan debt is similar to transferring high-interest credit card debt to a balance transfer credit card. With student loans, funds provided by your credit card issuer are to pay off your student debt. However, there are certain considerations for using a balance transfer to refinance student loan debt.

  1. Use the right balance transfer credit card. Many balance transfer credit cards allow for the transferring of debt other than credit card debt such as auto, personal or student loans but each issuer has their own guidelines of what’s accepted. For example, Bank of America, Citi, Capital One and Discover all indicate they will accept student loan debt transfers but American Express does not. However, Review the terms and conditions to ensure the card you choose accepts student loan balance transfers.
  2. Ensure the 0% APR introductory offer is long enough.  Do the math to determine how much you can afford to pay monthly and how long it would take to pay off. To get the value from the balance transfer card, you must be able to pay off your balances before the promotional offer expires. If after calculations, you don't think you can pay off the debt in 21 months (the longest 0% APR offer currently available), you should consider other options.
  3. Confirm your student loan servicer accepts balance transfer checks - In order to execute the balance transfer, you will need to pay your student loan balance with a balance transfer check from you credit card issuer. Balance transfer checks work like a regular check but are tied to the credit card account rather than your bank account. If they don’t accept balance transfer checks, contact your credit card issuer for other options.

Benefits of Balance Transfers for Student Loan Refinancing

  • Take advantage of the 0% APR - Although student loan interest rates are generally lower than credit card rates, you can’t top zero interest. You will save money and pay off your debt quicker.
  • Motivation to pay off the debt – Some people need to remain motivated to pay off their balances. Having a plan and a goal to pay off the 0% APR promotional period can help keep you focused.

Drawbacks of Balance Transfers for Student Loan Refinancing

  • Balance transfer fee - Most balance transfer cards charge a fee on the amount transferred (typically 3% or 5%). Depending on the amount of your loan debt, the fees could cost more than the interest you are currently paying. You can find some balance transfer credit cards with no balance transfer fee but you need very good or excellent credit to qualify. Do the math to determine how much you have to pay including the balance transfer fee.
  • Unable pay off balance before 0% APR offer expires - The interest rate goes up substantially after the offer expires. Therefore, if you can't pay off you full balance by the expiration date, it will cost you substantially.
  • Credit limit – Your credit card issuer will set a credit limit and you will only be able to transfer a balance up to the limit. If you have $30,000 in student debt but can only transfer $15,000 to the remaining amount will remain on your student loan balance. Because you will still be paying interest on the remaining amount, you may not save as much money as you hoped.


When considering options for refinancing student loans, many people don’t think about balance transfer credit cards as an option. However, the balance transfer option is not right for everyone. Make sure you weigh all the benefits and drawbacks in order to make the best decision for your financial situation.

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