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How to use a personal loan to pay for college

They can fill in the gaps, but be smart about rates and repayment terms before signing on.

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Anna Serio
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If your student loans fall short, you may be able to take out a personal loan to help cover the extra costs of paying for school. However, not all personal loan providers allow you to use these funds for tuition and other college expenses, so you’ll need to do your homework first.

And watch out for high interest rates and short repayment terms that can make these loans difficult to repay on a college student’s budget.

Why use a personal loan for college?

Personal loans allow students and parents to apply for amounts from $2,000 to $50,000 or more. You repay what you borrow plus interest and fees over a period of time both you and the lender agree to.

Lenders typically express the cost of a personal loan as an APR, your annual percentage rate. APRs can range from 6% to up to 36%, but you might have a hard time qualifying for a 6% APR as a student.

Repayment terms can range from one to seven years through monthly installments that begin shortly after you receive your funds.

Top 5 personal loans to pay for school

If the tuition’s covered but you need help with other expenses, you can take advantage of standard personal loans offered by banks and credit unions.

But if you’re looking for a personal loan to help cover educational expenses, your options are more limited since most lenders restrict using a personal loan for college. Compare these online lenders that allow you to apply your funds to educational expenses.

LenderEligibilityCosigners allowed?APR rangeLoan amountsTerms

Best Egg

Must have a credit score of 600 or higher and be a US citizen or permanent resident. Not available in IA, DC, WV, VT, PR, or GU.

No

5.99% to 29.99%

$2,000–$50,000

3 to 5 years

Stilt

Must be a US citizen, permanent resident or have a valid F1, OPT, H1B, H4, O1, L1, TN, J1 or DACA visa. You also must have a job and a valid US bank account and live in a serviced state.

No

7.99% to 15.99%

$1,000–$25,000

6 months to 3 years

Upstart

Credit score of 580 or 600 depending on state of residence, not a resident of West Virginia or Iowa, regular source of income, valid bank account, US citizen or permanent resident, ages 18+ (19+ in Alabama and Nebraska), proof of identity, valid email address

No

7.68% to 35.99%

$1,000–$50,000

3 or 5 years

Digital Federal Credit Union

Must be a current or former employee of a participating employer; a member of a participating organization, community or condo association; or a relative of an existing member.

Yes

5.99% to 18%

$200–$100,000

Up to 5 years

Boro

No

15.9% (starting at)

$1,000 to $3,000

1 to 3 years

Am I eligible for a personal loan?

Many students haven’t yet built a strong credit history, which often comes with steadier footing after graduation. Because they require steady employment, a minimum income and more, college students might want to bring on a parent as a cosigner. Or, parents might prefer taking out a personal loan in their name.

You’ll need to meet common eligibility requirements that include:

4 types of personal loans available to pay for college

Your options for personal loans may be limited if you’re still hitting the books. But many banks and lenders accept cosigners, which can help you qualify for stronger rates and better terms than you’d find on your own.

The best option for you will depend on your situation, budget and goals.

1. Unsecured personal loan in the student’s name

  • Best for graduate and part-time students with steady jobs and a credit history.

If you’re steadily paying off student loans or credit cards while supporting your studies, you might qualify for an unsecured personal loan on your own.

Alternative lenders like Upgrade consider your educational background when determining your eligibility. And SoFi’s personal loans come with perks like career advice and mentorship programs.

2. Unsecured personal loan in the parent’s name

  • Best for undergrads who rely on their parents financially.

If you’re not financially independent, you might have trouble qualifying for a personal loan even with a cosigner. Instead, you and your parents may want to consider taking out a personal loan in their name.

If one of your parents has a high income and long history of repaying debt on time, you’ll find more competitive rates and terms than for someone who’s still in school.

To show that you’re committed to repaying your loved ones, consider drawing up an informal agreement that includes how much you’ll pay monthly and by when. Or look to a service like Loanable, which helps you create a legally binding contract after you’ve landed a job.

3. Unsecured personal loan with a cosigner

  • Best for students with expenses outside of tuition and other school costs.

It’s tough to find a personal loan provider that allows you to both apply with a cosigner and put the funds toward school. But for expenses that aren’t directly related to school — like paying your off-campus rent — a cosigner might help you qualify for competitive rates.

Review your lender’s requirements for cosigners to make sure you can meet minimum income, credit scores and more.

4. Home equity loan

  • Best for parents who own equity in a home.

Home equity loans — sometimes called second mortgages — allow your parents to borrow against the equity of their home. Because their property acts as collateral for the loan, you’ll see more competitive rates than for unsecured loans. People also use home equity loans to consolidate student debt.

You can typically borrow between 80% and 90% of your home’s equity, paying it off over a longer period than a traditional personal loan. Given competitive rates and longer repayment terms, lenders like M&T Bank suggest a home equity loan as a student loan alternative.

Personal loans vs. private student loans

That providers limit borrowers from using personal loans for educational expenses isn’t surprising: Students just don’t have the same needs and ability to repay as your average borrower.

Key differences between personal loans and private student loans include:

  • Interest rates. Student loans often offer lower interest rates than personal loans — typically between 2% and 20%.
  • Fees. Private student loans don’t often come with application, origination or prepayment fees. Yet these fees are common with personal loans.
  • Terms. Student loan repayment terms can range from five to 25 years. Personal loans come with much shorter terms of one to seven years.
  • Repayment. Student loans offer perks like waiting up to six months after graduation before you start repayments, deferment or interest-only payments while you’re in school, as well as multiple deferment and forbearance options after. Personal loan repayments start right away and typically won’t allow you to pause payments if you hit a financial snag.
  • Loan amounts. Student loans often start at $5,000 and top off at your school’s total cost of attendance. Personal loans come in as low as $1,000 in some cases but rarely go above $100,000.
  • Cosigners. Almost all student loan providers allow you to apply with a cosigner, which just isn’t available with a personal loan.
  • Eligibility. The rigid requirements of personal loans could prevent many students from finding financing. Still, you might not be eligible for a federal or even private student loan if you don’t attend a Title IV or degree-granting institution.
  • Tax benefits. While you won’t be taxed on the amount you borrow with a personal loan, you also can’t write off the interest you pay. With a student loan, you may be able to deduct interest from your taxes. You can check with the IRS to see if your loan is eligible.

How personal loans and student loans compare

Should I take out a personal loan for college?

It depends on your circumstances and finances. Ask yourself the following questions to help you decide if a personal loan is right for you.

When to consider a personal loan

  • You’re employed and have good to excellent credit.
  • You can afford immediate repayments.
  • You have limited educational expenses and a creditworthy cosigner.
  • You aren’t eligible for public or private student loans.

When to look elsewhere

  • You’re eligible for a private or federal student loan.
  • You’re eligible for scholarships, grants or work-study.
  • You’re not employed, have poor credit and don’t have a cosigner.
  • You’re looking to borrow $50,000 or more.

Personal loans for students

Your financing options are further limited if you’re still in school and can’t get any more federal or private funding — especially if you don’t have a cosigner. However, you still have some choices. Some lenders like Boro consider factors like your GPA instead of your credit score and don’t require a cosigner.

These options are also to international students studying on an F1 visa. International students are ineligible for a federal loan and most private student loans, but can apply through a lender like Boro or Stilt, which don’t even require a Social Security number.

Personal loan alternatives to pay for college

Personal loans aren’t the only option for students needing help with extra expenses before they graduate.

  • Income share agreement (ISA). An ISA allows students to pledge a percentage of their income for a set number of years in exchange for tuition. Universities like Purdue offer it directly, but if yours doesn’t, you can apply through an ISA provider like Align.
  • Crowdfunding. Got a particular project or goal you need to fund — like paying for study abroad? Consider setting up a campaign on PeduL, Kickstarter or GoFundMe to raise money from your peers and social network.
  • Get a side gig. Making a little extra money on the side might be easier than you think. It can be as simple as selling your photos instead of posting them on Instagram or offering services you’re already proficient at, like editing or furniture assembly.

Bottom line

Personal loans aren’t designed for students. You generally need a job, strong credit and the ability to repay what you owe right away. Parents typically have an easier time qualifying if they have a steady job and strong credit. They can either apply on their own or cosign their children’s loans.

But both options may not be ideal: you just might find other sources of financing by talking with your school’s financial aid office. Learn more about how it all works with our comprehensive guide to student loans.

Frequently asked questions

What happens if I lie on my application?

You could face rejection or immediate repayment if you’re caught. If you apply for a personal loan that’s not intended for educational use, some lenders like LendingClub could cancel your loan. Most likely, your lender will reject your application if it finds out before you’re approved.

Can I use a personal loan to refinance student debt?

Yes, but you might want to check out your student loan refinancing options instead. They often come with more competitive rates and flexibility than your standard personal loan, including forgiveness programs.

Can anyone apply for a student loan?

No. Federal loans require at least half-time enrollment at a Title IV school. For private student loans, you also must either meet your lender’s credit and income requirements on your own or apply with a creditworthy cosigner.

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