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Should you use a personal loan to pay for college?

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In general, you shouldn’t use a personal loan to pay for college. For one, most lenders don’t allow personal loans to be used for educational expenses, and even if they did, most college students don’t have the credit history necessary to qualify. While it may be tempting to take out a personal loan to help cover the costs of college, student loans are almost always the better option.

Why you shouldn’t use a personal loan for college expenses

Due to federal regulations, many personal loan lenders don’t allow borrowers to use the funds for college. Federal and private student loans are almost always better financing alternatives because they’re created specifically for college students with their unique financial needs in mind.

While personal loans and student loans are similar in concept — you’ll borrow money upfront and pay it back over a number of years with interest — they’re designed for different use cases.

Personal loans have high interest rates that are based on financial health and credit history, so if you have a weak or thin credit history, it’ll be hard to get a reasonable interest rate or even get approved at all. Personal loans also have immediate repayment, with the first payment typically due 30 days after you receive your funds.

Student loans, on the other hand, are specifically created for educational purposes. They often have interest rates below 10 percent, and most federal student loans don’t even require a credit check. Student loans have longer repayment periods than personal loans, which makes payments manageable if you’re borrowing tens of thousands of dollars, and you often don’t need to start making payments until at least six months after you leave school.

What can I use a personal loan for in college?

While you’ll have to use a student loan to pay for your college tuition, you may be able to get a personal loan for some nonacademic expenses. Technically, you can use a personal loan to cover:

  • Rent.
  • Groceries
  • A personal laptop.
  • Emergencies.
  • Vacations.

However, keep in mind that student loans can cover almost all of these things — from textbooks and personal equipment to housing and transportation. Before taking out a personal loan, check whether the items you need could be covered under a student loan.

If you do decide to take out a personal loan, you’ll likely need an established credit history and stable income to get approved. You’ll also need to make sure that you have the funds available to make the monthly payments in full and on time. Try to minimize the amount you borrow, especially if you’re also taking out student loans.

Most importantly, read the fine print before you sign on the dotted line to ensure that you’re borrowing within your lender’s allowed use criteria.

Are there specific personal loans for college students?

Most personal loan lenders don’t offer personal loans specifically geared toward college students, since educational expenses often fall under prohibited use. However, there are personal loans created for those with poor credit or thin credit histories. Keep in mind that while you may get approved for these loans, your interest rate could be in the double digits.

The bottom line

When it comes to college expenses, always turn to student loans before personal loans. Student loans are created for financing a higher education, and they can cover almost everything you’ll need to purchase in your college career.

Borrowing a personal loan as a college student can lead to high-interest debt; if you do decide to apply for a personal loan, borrow for only the essentials.

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Written by
Hanneh Bareham
Student loans reporter
Hanneh Bareham specializes in everything related to student loans and helping you finance your next educational endeavor. She aims to help others reach their collegiate and financial goals through making student loans easier to understand.
Edited by
Student loans editor