Personal Loans

Can I Use a Personal Loan to Pay for College?

Wondering if you can use a personal loan to pay for college tuition? Learn about when you can and can't pay for college with a personal loan.
College students sit at a long table in the library while working on their computers
By Tracy Scott
Updated on: November 28th, 2021

Finding enough money to pay for college isn’t easy. While most students apply for free money in the form of scholarships and grants, they soon realize those sources are seldom enough to cover tuition, housing, and other educational expenses. As a result, college students will also use federal and private student loans, along with family support, to help cover the rising costs of a college education. Sadly, these additional sources don’t always close the funding gap.

And what about students who only need to earn continuing education credits or complete job training at institutions of higher learning? Since this coursework doesn’t lead to a degree, non-traditional students may not have access to institutional scholarships, grants, or federal or private student loans. Another funding source that might be worth considering is personal loans.

Before applying for this credit-based loan, learn more about the pros and cons of using a personal loan to pay for college expenses.

Compare Your Personal Loan Rates
Check Your Personal
Loan Rates
Choose a purpose for your loan
Always free and will not impact your credit score.

What Is a Personal Loan?

A personal loan is money that must be repaid to a lender according to the terms and conditions of the loan. Qualified applicants can borrow the money and use it to pay for a variety of expenses. Lenders make these loans to borrowers who meet their credit, income, and underwriting requirements. Usually, collateral isn’t required for the loan.

Can You Use a Personal Loan to Pay for College Tuition?

While personal loans can be used to pay for just about anything, some lenders may prohibit you from using loan proceeds to cover college tuition. A loan’s terms and conditions will disclose whether you can use the money to pay for higher education expenses. Lenders often include use limitations. Otherwise, allowing borrowers to use the funds for educational purposes would mean additional regulatory requirements, which could be too time-consuming or costly for the lender.

Even if you can use the money for college, there are at least five reasons prospective borrowers may want to think twice about using personal loans for college tuition. Compared to federal and private student loans, personal loans typically have:

  • Shorter repayment terms
  • No path to loan forgiveness
  • Higher interest rates and loan fees
  • Little or no grace period before the first payment is due
  • No forbearance or deferment options that allow you to temporarily pause payments

Personal loans aren’t meant to pay for post-secondary educational expenses. This is the main reason they should not be your first option when deciding how to pay for college.

Can You Use a Personal Loan for Other Educational Needs?

As with tuition, you can use a personal loan to cover other education expenses as long as the lender does not specifically prohibit them in its terms. A personal loan might be an appropriate alternative if you’re struggling to find other sources of funding. However, just like any form of debt, personal loans come with their own set of risks.

Before you apply for a personal loan, evaluate your individual situation. Determine how much money you need, what you need it for, when you need it by, and whether your budget can handle the repayment terms which begin shortly after you receive the loan funds.

If the thought of juggling a loan payment while in school keeps you up at night — or worse yet, distracts you from studying — consider delaying enrollment and saving up money until you can afford to enroll in classes without a loan.

When a Personal Loan Might Be a Good Idea

Despite the hurdles in using a personal loan to pay for college, there are times when it might be a smart choice. A personal loan might be a good idea if you’ve exhausted other financing options and:

  • Have good credit and a stable income
  • Only need to borrow a small amount
  • Can repay the loan while attending school
  • Want to avoid selling your belongings for cash
  • Have reached federal student loan borrowing limits
  • Are an international student who can apply with an eligible co-signer
  • Don’t plan on working while in school, but know someone who will co-sign on the loan for you
  • Are a nontraditional student seeking credits or training that’s only available at a college or university

Qualified personal loan applicants can obtain funding from banks, credit unions, and other lenders. Since loan terms and conditions vary by lender, be sure to read all loan disclosure documents before finalizing your application.

Alternatives to Personal Loans for College Tuition

Even if you can’t qualify for federal student aid, there are still other paths to paying for college tuition. Consider these options.

Emergency loans

Some colleges offer non-credit-based personal loans through their financial aid offices. These short-term loans, aka emergency loans, are typically no more than $500 and must be repaid within 30 calendar days. Qualifying for this type of personal loan is much simpler than applying for a loan through a financial institution. Colleges usually require that you:

  • Have a valid school ID
  • Be enrolled at least half-time
  • Do not have a history of late payments on prior emergency loans

Emergency loans are not free, but interest rates are usually in the single digits.

Tuition reimbursement programs

Alternative forms of aid can alleviate or even eliminate your need for a personal loan. For example, you or a member of your family may be eligible for tuition reimbursement or tuition assistance through an employer.

Some programs will even give an employee’s child or spouse access to program funds. With prior approval from the employer, you could use the program to cover educational costs, avoiding the need to work additional hours.

Income share agreements

Some colleges and universities, like Purdue University, allow you to enter into income share agreements (ISAs) directly with the institution or with an outside ISA lender. These controversial arrangements enable you to finance higher education expenses based on future earnings. ISAs are typically limited to 10% of future earnings over a 10-year repayment period.

These agreements are usually more complicated than federal, student, or personal loans. They often lack many of the consumer protections available with other types of loans. Make sure you understand the pros and cons of ISAs before using this funding option.

While paying for tuition or other college expenses with personal loans shouldn’t be your first option, they could provide the financial relief you need, when you need it. Before you consider personal loans, make sure other ways to pay for college have been fully explored.