American Express and Student Loans: A Comprehensive Guide

Student loans are a reality for many who pursue higher education. Like any other form of credit, they significantly impact your credit score. This article explores the relationship between American Express, student loans, and credit scores, providing a detailed overview for students and graduates alike.

Student Loans and Your Credit Score

Your student loan amount and your payment behavior directly affect your credit report and score. Consistent, on-time payments demonstrate responsible borrowing, which can significantly boost your credit score. Establishing good credit is crucial for future financial endeavors.

Building Good Credit

For student loans to positively influence your credit score, you need to establish a history of consistent, on-time payments once the repayment period begins. While minimum payments are typically due monthly, you can make payments more frequently.

The Impact of Missed Payments

As with any credit account, missed or late student loan payments can negatively affect your credit score. Federal student loan servicers generally don't report missed payments until they are 90 days past due, providing a grace period for borrowers facing financial difficulties.

However, if a borrower goes without making payments for an extended period (more than 270 days for some federal loans), the loan can go into default. Defaults can remain on credit reports for years and may lead to the government withholding the borrower’s federal tax refund.

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What to Do If You Can't Make a Payment

If you anticipate difficulty making your monthly payments, contact your lender immediately.

The Paradox of Paying Off Student Loans

Surprisingly, completely paying off your student loans, whether in a lump sum or through the final installment, may negatively affect your credit score.

Student Loans as a Stepping Stone

Despite potential drawbacks, student loans can be a valuable tool for launching your financial future. Making on-time payments in full can positively affect your credit history and, consequently, your credit score.

American Express and Student Loan Payments

While paying student loans with a credit card might seem like a convenient way to earn rewards or meet spending requirements, it's not always straightforward.

Can You Pay Student Loans Directly with a Credit Card?

Federal loan providers typically do not accept direct credit card payments. Many private student loan providers also follow this practice. However, there are alternative options to explore.

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Third-Party Payment Services

One option is to use a third-party payment service that charges your credit card and then sends the funds to your lender via check or transfer. Keep in mind that these services often charge transaction fees. It’s important to calculate whether the rewards you'll earn outweigh the additional fees.

Cash Advances and Convenience Checks

Another workaround involves using a cash advance to withdraw cash from your credit card and deposit it into your checking account to pay the loan bill. Alternatively, you can use a convenience check to make a direct payment to your lender, up to your credit card's available limit.

American Express Rewards Checking Account

If eligible, consider opening an American Express® Rewards Checking account, which earns interest on your balance. This allows your money to work for you even as it goes towards student loan payments.

Balance Transfer Cards

Before securing a balance transfer card with a 0% introductory APR, confirm that the credit card issuer allows student loan balance transfers. These cards can be attractive for their interest-free periods, but they may come with transfer fees, and the interest rate could be higher than your original student loan rate once the introductory period ends.

Refinancing Student Loans

Refinancing your student loan with a private loan might make sense in some situations, potentially saving you money on interest.

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American Express Personal Loans

American Express offers personal loans with competitive terms, including low APRs ranging from 6.99% to 19.97%. A credit score of at least 660 is generally required for approval. These loans are available to U.S. citizens and permanent residents.

Alternatives to Paying with Credit Cards

If paying your federal loans is currently impossible, you may want to apply for a temporary payment pause, either by deferment or forbearance.

Deferment vs. Forbearance

Deferment applies to specific federal loan types and can freeze payments along with the interest they accrue, but only under difficult conditions, like economic and medical hardship or when you take on more schooling. Forbearance allows you to stop making payments or reduce your monthly payment temporarily for up to 12 months.

Loan Consolidation

Combining several federal student loans into one through consolidation may be possible, but it may require an application. It’s probably best to do so when you qualify for a loan with better terms, lower rates, and a realistic repayment schedule.

Overpayments

To stay ahead of interest and pay down your loans sooner, you could structure your budget to pay more than your monthly minimum while also enrolling in autopay to help make sure the money comes out on time.

Credit Cards to Consider for Student Loan Payments (If Possible)

If you can pay your loans with a credit card (through third-party services or private lenders), consider these cards for maximizing rewards:

Blue Business Plus Credit Card from American Express

If you own your own business or have a side hustle, opening the Amex Blue Business Plus can give you another option to pay your student loans.

Annual fee: $0
Welcome offer: Earn 15,000 Membership Rewards points after you spend $3,000 in eligible purchases within your first three months of card membership.
Rewards rates: 2 points per dollar on all spending, up to $50,000 per calendar year (then 1 point per dollar)

Capital One Venture Rewards Credit Card

Annual fee: $95
Sign-up bonus: Earn 75,000 bonus miles after spending $4,000 on purchases within the first three months from account opening. Plus, upon approval, you'll receive a $250 Capital One Travel credit to use during your first year.
Rewards rates: 5 miles per dollar on hotels, vacation rentals, and rental cars booked through Capital One Travel and 2 miles per dollar on all other purchases

Citi Double Cash Card

Annual fee: $0
Sign-up bonus: Earn $200 cash back after you spend $1,500 on purchases in the first six months of account opening.
Rewards rates: Earn 2% cash back on every purchase (1% when you buy and 1% when you pay your bill). Plus, earn 5% total cash back on hotel, car rentals and attractions booked on the Citi Travel℠ portal.

Capital One VentureOne Rewards Credit Card

Annual fee: $0
Sign-up bonus: Earn 20,000 bonus miles after spending $500 on purchases within the first three months from account opening.
Rewards rates: Earn unlimited 1.25 miles per dollar on every purchase.

Bank of America Premium Rewards Credit Card

Annual fee: $95
Sign-up bonus: Earn 60,000 bonus points after you make at least $4,000 in purchases in the first 90 days of account opening.
Rewards rates: 2 points per dollar spent on travel and dining; 1.5 points per dollar spent on all other purchases

Chase Freedom Unlimited

Annual fee: $0
Sign-up bonus: Earn a $200 bonus after spending $500 on purchases within the first three months from account opening.
Rewards rates: Earn 5% cash back on travel booked through Chase Travel℠, 3% back at drugstores and on dining at restaurants (including takeout and eligible delivery services) and 1.5% back on all other purchases.

Graduate Student Loans: Funding Your Future

For those considering graduate school, student loans can be a valuable tool to finance your education.

Federal Graduate Student Loans

Direct Unsubsidized Loans: Available to both undergraduate and graduate students, regardless of financial need.
Direct PLUS Loans: Specifically for graduate students and eligible parents to finance their children’s education. These loans are unsubsidized and have a fixed interest rate.

To apply for federal graduate student loans, complete the Free Application for Federal Student Aid (FAFSA).

Private Graduate Student Loans

Offered by private lenders like banks and credit unions, these loans may use your credit score to determine eligibility. Interest rates may be higher than federal loans.

State-Based Student Loans

These are typically private loans offered by state agencies and non-profit organizations. They do not qualify for federal benefits.

Repayment Plans

Repayment plans for graduate student loans vary. You might have equal monthly payments or start with lower payments that increase over time.

Other Ways to Pay for Graduate School

Other options include grants, scholarships, the federal work-study program, savings, income share agreements (ISAs), and employer tuition reimbursement.

American Express Customer Service

American Express offers customer service through various channels. Depending on the type of financial product you are calling about, there may also be a more specific number for you to call than the general American Express customer service phone number. Then, click the “Log In” to access your online account.

However, some customers have reported long wait times when contacting Amex Travel and difficulty resolving issues. Others have praised the customer service for quickly resolving potential fraud issues.

American Express Credit Card Perks

American Express credit cards offer various benefits, including:

Travel benefits: Airport lounge access, annual travel credits, Global Entry/TSA PreCheck® credit, hotel elite status, and more.
Rewards program: Earn points on flights, hotels, and other eligible purchases.
Travel insurance: Car rental insurance, baggage insurance, and trip delay/cancellation insurance.

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