Can (and Should) I Use a Personal Loan for College?

You can’t use a personal loan to pay for college tuition. You can use one for living expenses, but it’s not cheap.

Anna HelhoskiSeptember 22, 2020
On a similar note...
On a similar note...

Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own.

Personal loans can’t be used to pay for your college education, but you may be tempted to borrow for living expenses. Here’s why you shouldn’t:

  • Repayment begins immediately. Unlike most student loans, which allow you to defer loan payments until six months after leaving school, your first bill for a personal loan would be due right after you receive the money.

  • You’ll pay high rates. Unless you have a lengthy credit history and a high credit score, you’ll pay interest rates that are higher than even student loans offered to borrowers with bad credit.

  • You’ll have a shorter payoff period. Repayment on personal loans tends to be five years long, at most. This may seem like a perk, but you’ll have to repay while you’re attending school and your loan payments will be higher than with student loans, which have longer repayment periods.

Still not convinced? Here are answers to four common questions about using personal loans for college.

Can I use a personal loan to pay my college tuition?

Any lender that makes a loan for educational purposes has to deal with regulatory red tape under federal law, but loans for personal use don’t have such rules. That’s why lenders that provide personal loans don’t allow the loans to be used for college.

You have better alternatives available anyway.

Get financial aid for college by submitting a Free Application for Federal Student Aid, or FAFSA. It’s the key to aid like grants, scholarships and work-study, which you should accept before you consider borrowing. This type of aid doesn’t need to be repaid, so it’s your best option to pay for college.

If you do plan to borrow, always maximize your federal subsidized and unsubsidized loans first, as they carry lower rates and offer more protections than private student loans.

If you’ve borrowed all the federal loans you can and you still need money to fill a college payment gap, compare offers on private loans from banks, credit unions and online lenders.

Can I use a personal loan for living expenses in college?

Personal loans, like all loans, must be repaid with interest. If you need money for living expenses, turn to other financial sources first. You could find a part-time job on or off campus to help with personal expenses. Or, explore opportunities for private scholarships, which don’t need to be repaid.

If you want to borrow for living expenses, stick with student loans. Personal loans don’t offer the same protections designed for students that student loans do, especially federal student loans.

Personal loans also tend to carry much higher interest rates than most student loan options. Repayment terms are typically longer with student loans — 10 years is standard — so you have more time to pay off your debt. This can keep monthly payments lower and more affordable with student loans compared to personal loans.

Can I use a personal loan for an emergency?

If you need emergency money in college and you’re considering a personal loan, first contact your school’s financial aid office to discuss what emergency aid options are available.

Schools often have short-term emergency loans, completion scholarships, grants or vouchers available for students who have emergencies. An emergency that could fall under these programs would typically include a health emergency, death in the family, natural disasters or family job loss.

Personal loans from a bank, credit union or online lender can be used in case of an emergency, but they carry very high interest rates.

Can I use a personal loan to pay off student loans?

If you are thinking of using a personal loan to pay student loans you can’t afford, instead consider enrolling in an income-driven repayment plan to make monthly payments more affordable.

If you’re looking to find a better rate on your debt, many lenders specialize in student loan refinancing for those with good credit and steady income.

Personal loans come with much higher interest rates than student loans do, and you’ll also miss out on multiple benefits and protections like these:

  • Deferment and forbearance. Federal and private lenders both offer opportunities to temporarily pause payments on your loans through deferment and forbearance. This can be helpful if you decide to go back to school or lose your job and can’t make payments.

  • Student loan repayment options. If you take a loan from the federal government or a private lender, you’ll likely have different options for repayment. Federal loans, in particular, offer beneficial programs like income-driven repayment, which caps your payments at a percentage of your discretionary income.

  • Student loan forgiveness. If you pay off federal loans with a personal loan, you’ll miss out on opportunities for loan forgiveness, including Public Service Loan Forgiveness.

  • A grace period, if you haven’t finished school. If you’re trying to get ahead of your student loan debt by paying it off with a personal loan before graduation, you’ll miss out on the six-month grace period after leaving school when you don’t have to make loan payments.

  • Tax benefits. Personal loans, unlike student loans, are not tax-deductible. You can deduct up to $2,500 in student loans if your gross annual income is less than $80,000.

If I do want a personal loan, what are my options?

If you are interested in a personal loan, it’s difficult to apply on your own without a co-signer since most lenders will require borrowers to have credit histories.

First try a credit union, which tend to offer lower interest rates for those with average or bad credit and are often willing to consider more than just your credit.

If you're considering an online lender, Upstart is one of the few that will lend to college students who don't have credit histories. Instead, they consider your post-grad earning potential.

Find ways to save with NerdWallet

Really get to know your money and find cash you can put aside and grow.