Earning a college degree is a great way to advance your education and broaden your job opportunities, but it can also put you into some of the most costly debt you will take on in your lifetime.
College tuition is expensive. College Board estimates that it costs $38,880 on average to earn a bachelor’s degree at a private university, and $10,440 to earn a degree at a state university. Americans today carry a staggering 1.762 trillion dollars in college debt, and many of them may spend the next 20 to 45 years paying their student loans.
When it comes time to start paying your tuition, it may be tempting to charge it to a credit card. After all, if you’re spending the money either way, shouldn’t you get some rewards back in the process? While this sounds nice in theory, it’s not the best financial decision in the long run, and could land you in even worse debt.
Can you pay college tuition with a credit card?
Yes, but it’s probably not a good idea.
Colleges that accept credit cards will charge a convenience fee to complete your payment. These fees are typically 2.5 percent or more of the tuition charge—which can add up quickly.
To put that into perspective, if you’re charging $12,000 in tuition, you will pay an additional $300 just in fees. This will likely outweigh any points or cash back rewards you would earn on your credit card.
Why you shouldn’t pay for tuition with a credit card
Another reason to avoid paying your tuition with a credit card is compounding interest. If you charge your tuition to a credit card and then don’t pay it off in full within a month, the remaining balance will be subject to an APR that is much higher than any traditional student loan would charge.
“I’d steer clear of this strategy,” says Bankrate’s industry expert Ted Rossman.
Most colleges and universities that accept credit cards charge processing fees, he explains. “If you’re going to be charged, say, a 3 percent fee for using a credit card, that’s probably more than you could expect to earn in rewards,” Rossman says. “Also, this would be a very dangerous strategy if you end up carrying a balance, since the average credit card charges more than 16 percent interest.”
There are rare exceptions that could make paying for college tuition with a credit card a feasible financial choice.
“There are limited instances in which this might make sense,” Rossman says. “The first prerequisite would be to pay the bill in full. I think even going for a zero percent promotional rate is too risky because this could be a big charge and the interest rate would skyrocket at the end of the term. Student loans have much more favorable interest rates and repayment terms than credit cards.
The only time it would make sense to pay for tuition with a credit card is if you’re able to pay the charge in full before your next billing cycle. “If you’re using the payment to hit a sign-up bonus threshold, for example, and you couldn’t hit it with your regular spending, and the value of the bonus outweighs any fees you’re charged,” Rossman says, “then it could make sense for certain cases.”
Other ways to pay for college tuition
1. Apply for financial aid
To apply for financial aid you will need to complete the Free Application for Federal Student Aid (FAFSA) every year to see how much aid you are eligible for. FAFSA allows the Department of Education to see how much aid you qualify for. Scholarships and financial aid can come in the form of grants, work-study programs, low interest loans and scholarships.
2. Explore scholarship options
FAFSA is not the only way to qualify for a scholarship. Many students can obtain partial or even full scholarships for academic success, athletics, extenuating circumstances such as a disability, being part of a protected minority class or falling below the federal poverty line, just to name a few. There are scholarships available from a wide variety of institutions, so do your research before paying your tuition in full.
The U.S. Department of Education offers tools to help you find and apply for scholarships you may qualify for.
3. See if your university offers installment payment plans
Lastly, if you can’t find a scholarship that fits your needs, consider reaching out to your university directly. Many institutions will offer installment plans to pay for your tuition in more manageable installments, rather than all at once.
The bottom line
College is a great way to improve your education and expand your job opportunities, but if you aren’t careful it can also land you in a mountain of debt. While charging it to a credit card may seem appealing, in the long run, a better option is to explore scholarships and financial aid not subject to high interest rates.