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It’s graduation season, and that is a very exciting chapter for millions of ambitious students. I hate to be the party pooper, but it’s not all celebrations and new opportunities this time of year. There’s this extremely pesky reality of higher education in the 21st century: student loans. Even with hefty scholarships, upon graduation from grad school at NYU I was handed not only a shiny new master’s degree, but a six-figure student loan balance to go along with it. That was 14 years ago.
According to Forbes, the current 2019 US student loan debt total for more than 44 million borrowers tops $1.5 trillion — yes, that’s trillion with a “t.” I wish I could change that sobering reality. I can’t, but I can help borrowers make the most of repaying those student loans by earning miles and points with each payment.
While I didn’t earn miles while repaying all of my student loans, I became very aggressive with repayments in the last year, and earned tens of thousands of miles and points while finishing off that debt. In fact, today is the first day I’ve been without student loan debt since I was in my early 20’s. Here’s how I turned that obligation into our next vacation.
Earn (Lots of) Miles With the Gift of College
When I decided to get serious about paying off the rest of my student loans, I wanted to make it as rewarding as possible. Instead of mailing in big checks to the lender, I started paying off my loans via the Gift of College program. This program sells gift cards that you can give as gifts to someone who is saving for college. The recipient can then deposit these gift cards into their eligible 529 savings plan or even use them to repay an eligible existing student loan. Of course, you don’t have to give them as gifts, you can use them for yourself, your kids or for anyone.
Gift of College gift cards are not available everywhere, but they are sold at more than 3,000 stores around the country. In my neck of the woods in Texas, they are sold at a number of grocery stores, including my nearby HEB grocery store. This means as I was picking up our juice, eggs and paper towels, I could also toss a $500 Gift of College gift card in the basket. Heck, sometimes I picked up two at a time. A $500 Gift of College gift card would come with a $5.95 fee, but this fee was more than worth it to me because of the points earned.
My strategy was to purchase a $505.95 gift card with a credit card that awarded a bonus at grocery stores. Often that was a 4x bonus at US supermarkets on the American Express® Gold Card (up to $25,000 per year; then 1x), sometimes it was a 5% cash back (5x points) bonus on the Chase Freedom when grocery stores were a quarterly bonus category (up to $1,500 per quarter, activation required) and other times it was 4.5x points on The Amex EveryDay® Preferred Credit Card from American Express on months I thought I could hit 30 transactions to trigger the 50% point bonus. Another great choice would have been the Blue Cash Preferred® Card from American Express, which awards 6% cash back at US supermarkets (up to $6,000 per year; then 1%). The information for the Amex EveryDay® Preferred Credit Card has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.
Using the 4 Membership Rewards points per dollar from the Amex Gold scenario, a $505.95 gift card earned 2,023 Membership Rewards points, worth $40.46 by TPG valuations. If you deduct the $5.95 fee, that is still $34.51 in points for every $500 in loans I paid off — and I paid off five figures in the last year.
To ramp these numbers up a bit, using 4x points as the multiplier, every $10,000 of loans paid off via this gift card manner earned 40,000 Membership Rewards points worth $800 (with an out-of-pocket cost of $119). I didn’t pay off all $100k+ in loans in this manner over the years, but if I had, it would have been more than 400,000 points in my virtual pocket!
Here are some ideas on how to maximize those Membership Rewards points.
Where to Buy Gift of College Gift Cards
Here’s the bad news: Gift of College gift cards can’t easily be purchased everywhere at a rewarding rate. Some good purchase options that sell the $500 gift cards include:
- Brookshire Brothers Grocery Store
- Fred’s Grocery Store
- Foodmaxx Grocery Store
- HEB Grocery Stores
- Lucky Grocery Store
- Save Mart Supermarkets
Use the Gift of College store locator to see where the gift cards are available in your area. Note that Target and Barnes & Noble, while widely available, probably aren’t good outlets to consider for buying these cards because of low bonus category earning opportunities at those retailers and because you can only purchase $50 to $200 (at Barnes & Noble) in fixed gift card amounts. Without being able to purchase $500 at a time, the added fee washes out some to all of the rewards earnings.
Before You Go All In
Other than the geographical limitations on who can really benefit from this method of earning miles and points while paying off student loans, there are some caveats to be aware of with using Gift of College.
First, not all loan programs work with the Gift of College program, so check carefully to see if yours is on the list. As of today, a sampling of the student loan lender includes: Sallie Mae, PenFed, Navient, OSLA, Discover and Wells Fargo. Additionally, I’ll be the first to admit that getting the payment to post correctly the first time was not easy for technical reasons I never understood. I had to contact the Gift of College customer service email account and have them fix some glitch before it all worked. But, once that was fixed once, it worked. Start small and keep making your normal payments while you sort out this process. Also know that it can take several weeks for payments to make their way from the Gift of College program to your student loan servicer.
This may all sound like a lot, but tens of thousands of points later, it was more than worth it in the end.
If the Gift of College option is not a pathway to maximize your college savings or student loan payoff plan, there are some other options. First, you can choose to use Plastiq to pay almost anything using a credit card — including student loans or even college tuition payments. However, outside of some promotional offers, it can cost up to 2.5% in fees to use Plastiq (which can be worth it in some fringe cases, such as hitting a minimum spending requirement).
Should you or someone you financially support be currently enrolled in college, you can make tuition payments with a credit card to earn miles and points (just please do not rack up credit card debt). Most schools that accept credit cards charge a fee of around 2.5% to make payments this way, but that isn’t true across the board. There are a few schools that do not charge an additional fee for making payments with a credit card.
Thankfully, at 38 years old, my chapter of earning miles while paying off my own student loans has (finally) closed. However, I have two little girls who are quickly becoming “not so little.” We actively contribute to 529 accounts for each of them, so our opportunities to earn miles and points while paying for college are really just beginning.
Read on for more college maximizing tips:
- Earn Points Paying for Tuition With a Credit Card
- Looking at College: Take Your Kids on a Visit-Cation
- 6 Most Important Times in Life to Travel
- Best Credit Cards for College Students
- Getting Started With Miles and Points as a College Student
Featured image by dszc/Getty Images
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