Can you use a credit card to pay for college expenses? Just because you technically can does not necessarily mean you should. If you’re considering the pros and cons, here are some things to add to your evaluation:
| Credit Cards | Private Student Loans |
|---|---|
| Revolving line of credit that typically carries a variable interest rate, often higher than that of a private student loans. | Installment loan with either a fixed or variable interest rate. In some cases, lenders offer discounts on the interest rate for things like auto debit (ACH) payments. |
| This is a non-school-certified option to pay for college expenses. | Must be certified by the college or university. |
| College/universities may charge a credit card processing fee (or convenience fee). This is in addition to the interest charges the credit card company imposes. | Many lenders waive the origination fee. For certain borrowers, this may even make private student loans an attractive option over federal loan options (such as Parent PLUS and Grad PLUS programs). |
| As an industry standard, credit card payment are due the following month after expenses are incurred. There is a narrow window (billing cycle of between 21-25 days) to avoid interest charges if balances are paid in full. |
Loans may be deferred until after graduation, or interest-only payment may be made during school. If you don't pay the interest, it will be added (capitalized) to your loan balance following the grace period, at the start of repayment. |
| The primary cardholder is responsible for the debt. There is no cosigner release option. | Cosigners may be released after a series of qualifying, on-time monthly payments. This varies by lender. Cosigners may also be released via student loan refinancing. And this includes the option to transfer debt from the parent to the student (through select partners). Eligibility is based on credit an income verification. |
| Very rarely are forbearance programs available. | Deferment or forbearance options may exist during repayment. |
| Credit cards may carry perks like cash back bonuses and points with partner program (like airlines and hotels). | Benefits vary by lender but are usually not as diverse as credit card perks. |