Why won’t my servicer take credit cards?

Now there are different rules for when a student loan company will take debit.  In almost no cases will they take a credit card but in some will they take debit.  Some of these examples (which vary by servicer so ask!) are:

1)When you are in rehabilitation for your loans

2)When you’ve used it in the past (such as reason 1)

3)After you are a certain amount of days delinquent

But why won’t they take them overall?  Well the official reason is that the government does not want you paying debt with debt.  This is especially true because very few credit card companies will offer a rate that is better than what the government is giving you (at least standard rate as their are introductory offers that are betters)

A couple offer unofficial reasons they make not like credit cards:

1) You can’t bankrupt student loans but you can credit cards.  This is closing a loophole.  Though many bankruptcy judges may see through this anyway

2) Credit card companies charge crazy rates to process transactions.  It would cost a lot more money to accept cards over checking/routing.

But how about debit cards?  Well the main problem is that credit and debit are run off the same system so usually the system can’t figure out the difference.  In fact if someone is allowed to use a debit card we have to send them to a special third party processor.

So while you may or may not agree with it there are the reasons why plastic is not favored by the Department of Education (just in case you ever wanted to know!)

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