American Express Student Loan Alternatives

American Express offers a variety of financial products to its customers — but there’s no such thing as an American Express student loan. If you’re looking to cover educational costs, you could in theory use your Amex card or take out a personal loan, but is either option the best for you financially?

Although American Express student loans may not be an option, alternatives are available that won’t require you to max out your credit card or take out a high–interest loan. Here are a few options if you need money for school.

Alternatives to American Express student loans

Some students manage to pay for their education by receiving gift aid (such as scholarships), working to increase their income and asking for help from family and friends. However, you may also be among the many who resort to taking out a student loan.

Given the cost involved for college debt, you’ll want to make sure you borrow from the right lender. And if your preferred lender is American Express, which isn’t in the student loan business, you’ll need to consider the competition.

Federal student loans

Perhaps the best student loan option is to borrow from the federal government. The Department of Education offers undergraduates, postgraduate students and parents the ability to borrow for higher education costs.

Federal student loans are usually recommended over those of private lenders, even if you do have stellar credit. That’s because federal loans offer unique features and protections, including:

• Income-driven repayment : This allows you to reduce your monthly payments by capping your dues at a percentage of your disposable income. And if you have no income, you may end up owing $0 per month.
• Deferment and forbearance : Postpone your payments for a number of qualifying reasons, including job loss or a medical emergency. (Note that the government has offered automatic interest-free forbearance during the coronavirus pandemic.)
• Student loan forgiveness : Although repayment assistance programs also exist through employers and state governments, the Department of Education has exclusive programs, including forgiveness specifically for public service professionals.

As for the loans themselves, you could qualify for the Department of Education’s direct subsidized loan if you can demonstrate financial need. For this type of loan, accruing interest is covered by the government while you’re in school, during your grace period, and for other pauses in repayment. Otherwise, you will at least have access to direct unsubsidized loans.

Private student loans

Although there are rare scenarios when you should prioritize a private lender over the Department of Education, it’s usually best to save private student loans to fill any remaining gaps in your borrowing needs after you’ve exhausted your federal loan options.

In particular, a student loan from a bank, credit union or online lender could come in handy if you run up against federal loan borrowing limits. While postgraduate students and parents can borrow up to the cost of attendance, Uncle Sam limits undergraduates to $5,500 to $7,500 per school year for dependent students, and $9,500 to $12,500 for financially independent students.

If you initially sought out American Express to serve this purpose, you might be interested to learn about three other well-known student loan lenders that offer not just credit cards or savings accounts, but yes, student loans as well.

1. Sallie Mae

Sallie Mae offers student loans for undergraduate and graduate students, as well as individuals seeking professional training or certifications. Students can receive funds with less-than-half-time enrollment, and loan payments can be deferred while enrolled.

Additional Sallie Mae loan features include:

• Annual percentage rate (APR) starting at 2.00%
• Loans range from $1,000 and up
• Variable and fixed-rate loans available
• No origination fee
• Discount of 0.25% on interest rate when enrolled in autopay

2. SoFi

SoFi offers undergraduate and graduate student loans that cover 100% of educational costs with repayment terms of five, 7, 10 and 15 years. The lender’s unique rewards program allows students to earn points that can be used to repay their SoFi loan. SoFi also protects unemployed borrowers by offering Unemployment Protection, which suspends a borrower’s payments for up to 12 months if their employment is terminated by their employer.

SoFi students loans also feature the following:

• APRs of 1.89% and up
• Minimum loan amount of $5,000
• Rate discount of 0.25% when enrolled in autopay
• Additional rate discount of 0.125% for current students returning to school
• Six-month grace period after graduation
• Variable and fixed-rates loans available

3. College Ave

College Ave offers undergraduate and graduate loans with repayment terms ranging from five to 15 years. Similar to the private student loans available through Sallie Mae and SoFi, a student loan through College Ave can be used to cover the cost of tuition, books, room and board and other educational fees assessed by your institution.

Other College Ave student loan features include:

• APRs of 1.19% and up
• Minimum loan amount of $1,000
• Rate discount of 0.25% when enrolled in autopay
• Variable and fixed-rates loans available
• No origination fee

Paying student loans with an American Express credit card

Since American Express student loans don’t exist, you may be thinking why not pay off your student loan with a credit card?

Your high limit can easily cover the cost of your monthly payment, so it could seem like a smart move — and maybe even earn you some cash back or rewards points. But this could be a big mistake.

Paying off a student loan with your credit card isn’t like buying gas, shoes or making another small purchase. You’ll want to consider two things when paying off your student loan with a credit card: interest and fees.

Cardholders will be charged interest on their card, and since credit card interest rates can be high, you’ll actually pay more. In addition, your lender may not allow you to use a credit card for payment, and if they do, you could be assessed fees by your lender or a third-party card processor.

Finding the best private student loan for you

Just because American Express doesn’t offer student loans, it doesn’t mean you can’t find financing from a similar lender.

Starting with the Department of Education’s menu of federal student loans is a good first step. You might also consider banks, credit unions and online lenders if you don’t value federal loan protections or, more likely, if you need to borrow beyond federal loan limits.

Shop around for the right private student loan lender, and compare your options based on the criteria that makes sense for you. Ensure that your pick offers a low interest rate and the loan term you desire, plus repayment safeguards that won’t leave you unprotected.

One place to start is with our list of favorite lenders — even if American Express isn’t on there.