by Ronnie Charrier
Hi there, I'm Ronnie, and I am one of more than 44 million Americans who have student loans. 44 million! That is roughly a quarter of all American adults. And we're not taking small loans: this year's college graduates owe an average of $37,172, a number which is up $20,000 from 13 years ago. For those that have not yet graduated, this number is only going to increase, as colleges make degrees more expensive. My loans are significantly higher than the average. My wife and I just flew business class to Spain for our summer vacation.
How is that possible? Read on...
Let's move past the fact that in nearly 40 countries (more than half of which are members of the Organization for Economic Co-operation and Development), public colleges charge no tuition. It is frustrating that our education system is geared towards financial gain for the educational institutions, but we can argue the philosophical issues of this in another piece. The bottom line was that I chose to get a tertiary education in America, I borrowed money to pay for my degrees, and now I have to pay it back.
Nobody likes being in debt. It's uncomfortable and, at times, downright scary. But what if, instead of looking at my loans as this huge, looming burden, I figured out a way to use them to my advantage? Intriguing...
See, about a year ago my wife and I really started getting into “mileage hacking”. We had both taken jobs in Saudi Arabia, and we were trying to figure out how we would be able to afford to travel as much as possible while at the same time paying off my student loan debt. I had been reading articles on websites like The Points Guy and One Mile At A Time about the best way to get airline miles, and following Facebook groups that posted little tricks and tips for traveling, when I came across someone asking the question “How can I pay my student loans with credit cards to get airline miles?”
If you google "paying student loans with a credit card", you will see that within the last few years, student loan providers removed the option of making payments with credit cards. So there goes that idea. Or does it? As I kept reading, I uncovered the answer that I was looking for: a payment service called Gift of College Gift Cards.
Everyone is familiar with the concept of "gift cards" (or, if you aren't, your family was clearly more imaginative than mine when it came to Secret Santa) - you pay for the person to buy their own gift. Well, through the Gift of College website, a person can pay for another person to pay off their student loans. Here's the thing with Gift of College: they can both be the same person! This means that you can use a credit card to purchase these gift cards, which are then used to pay off your student loan.
So why is this a big deal? Even paying off an average student loan of $37,000 would only net you enough points for a domestic flight - nice, but not exactly the massive return worth reading an article about.
This is where we get to the key aspect to all of this: credit card sign-up bonuses. Essentially, in order to attract new customers, many credit card companies offer a sign-up bonus of miles and/or travel perks to entice you to sign up for their card, sometimes as many as 100,000 points! This is the goal, to get as many of these sign-up bonuses as we can and then cancel the card before getting hit with the yearly fee.
I know it seems like there should be a catch, so let's look a little closer.
The fee for the Gift of College cards is $5.95 for any value above $100, so if you’re able to find one of the links online that allow you to purchase $500 gift cards ($200 is the standard amount, but higher availability can be found if you look hard enough), you’re looking at a 1.1% fee on your monthly payment. The gift cards can be received electronically, and once they’re in your email, you can go back to the Gift of College website and redeem them directly to your student loan account, which you've already connected. They usually take about 10 days to post to your student loan account.
I must now include the part where I admit that it is kind of a pain in the ass to purchase the gift cards, wait a day or two, log back in and redeem them and then go to each different credit card and paying it off... and to do this every month. The convoluted process is probably what puts a lot of people off, but hear me out, I'm about to get to the good stuff.
So how does the math work? Well let’s look at a person paying off $1,000 a month on their student loans. Let’s say during the year they got the following cards (this is not a recommendation, just cards I found quickly that worked with our made-up budget):
- Citi / AAdvantage Platinum Select World Elite Mastercard (60,000 American Airlines AAdvantage bonus miles after $3,000 in purchases within the first three months)
- AAdvantage Aviator Red World Elite Mastercard (50,000 American Airlines AAdvantage bonus miles after a single purchase plus paying the $95 sign-up fee)
- Gold Delta SkyMiles Credit Card (60,000 Delta bonus miles after spending $3,000 within the first 4 months)
- United Explorer Card (40,000 United bonus miles after you spend $2,000 on purchases in the first 3 months)
- British Airways Visa Signature Card (50,000 British Airways Avios after you spend $3,000 in the first three months)
All told, you would have 271,000 miles and you would have spent an additional $205 in fees and the one sign-up cost. And what exactly could you do with these miles that you just got for paying what you'd be paying anyways?
You could start by flying business class from the US to Asia for 70,000 AA miles on either Cathay Pacific or Japan Airlines, which includes China, Singapore, Thailand, etc. From there, you could add on an extra destination to your trip, flying from Japan to Australia or New Zealand with Korean Air in business class for 65,000 Delta miles.
Want to head to South America instead? You can get a one-way business class ticket to northern South America for 35,000 United miles on Avianca between New York (JFK) and Bogotá (BOG), Houston and Ecuador (UIO), and Newark and Peru (LIM).
For 57,500 AA miles, you can book a business class ticket from Los Angeles to London via British Air.
Or you could use your British Avios to fly domestic business class on American for as little as 25,000 Avios each way.
In the last year, my wife and I have accumulated almost 1 million miles, most of which has come by paying off student loans using this system. We've flown business class on Air France, American Airlines, British Airlines, Air France, Emirates, Ethiopian Airlines, all with miles, and have had our business class flights back home for Christmas booked for 6 months now.
And if you're thinking this all sounds too good to be true/legal, and are wondering what all of this activity will do to your credit score, mine has gone up 70 points this year.
This isn't some big secret that's only available to savvy travelers: ask anyone who knows me, I talk about this a lot, but that's because that I want the people I know who have student loan debt to also benefit like I have.
Americans are privileged in many ways, and in many other ways we aren't as well off as other countries. But if we are going to be slapped with a huge debt in our early twenties (or thirties for me) as par for the course in a capitalist system, we may as well figure out a way to make the system work to our advantage.
I hope this article has been helpful! Please reach out in the comments section if you have any questions, or if you have also tried this.