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If you’re determined to pay off your student loan debt as quickly as possible, you might be looking for creative solutions — like using a personal loan to pay off student loans.
Personal loans can give you quick access to cash, which could be helpful if you’re struggling with your student loans. You also might qualify for a low interest rate on a personal loan if you have good credit.
However, while using a personal loan to pay off student loan debt can seem like a good plan, it could be an unrealistic repayment strategy.
Here’s what you need to know before considering using a personal loan to pay off a student loan:
- Paying off student loans with a personal loan
- Advantages
- Disadvantages
- Additional loan repayment options
- Is using a personal loan to pay off student loan debt right for you?
Paying off student loans with a personal loan
Using a personal loan to pay off your student loans can be appealing. With many personal loan lenders, you can submit an application online, get an instant decision, and have money deposited into your bank account quickly.
But using a personal loan to repay your student loans usually isn’t a good idea. If you want to tackle your debt, student loan refinancing could be a better option.
With refinancing, you’ll likely get a lower interest rate than you would with a personal loan. Plus, refinancing also offers longer repayment terms compared to personal loans.
| Personal loans | Student loan refinancing | |
|---|---|---|
| Fixed rates from (APR) | 5.2%+ | 4.85%+ |
| Variable rates from (APR) | N/A | 5.28%+ |
| Rates from Credible personal loan and student loan refinancing lenders. | ||
If you need help with your student loan payments, some other options to consider include:
- Signing up for an income-driven repayment plan. If you have federal student loans, signing up for an income-driven repayment (IDR) plan will give you payments that are based on your income — usually 10% to 20% of your discretionary income. Additionally, any remaining balance will be forgiven after 20 or 25 years, depending on the plan.
- Applying for deferment. This will temporarily pause your student loan payments. Keep in mind that while federal student loans come with built-in deferment options in certain situations, private student loan deferment is offered at the discretion of the lender. Additionally, interest might continue accruing on your loans during a deferment period, depending on the type of loans you have.
- Applying for forbearance. This is another way to postpone your payments for a period of time. There are two main types of forbearance available for federal student loans — general (or discretionary) forbearance offered at the discretion of your servicer and mandatory forbearance that your servicer is required to grant in specific cases. Like deferment, forbearance for private student loans is provided at the discretion of the lender. Keep in mind that interest will continue to accrue on your loans while in forbearance.
- Consolidating your federal loans. Federal student loan borrowers can consolidate their loans into a Direct Consolidation Loan. While this won’t change your interest rate, it will let you extend your repayment term up to 30 years, which could greatly reduce your monthly payments. Just keep in mind that you’ll pay more in interest over time with a longer term.
Learn More: How to Refinance Your Student Loans
Advantages
Taking out a personal loan to pay off student loans could be risky, but there are also some benefits to this approach:
- Personal loans are usually processed quickly: With student loan refinancing, it can take several days or even weeks for your existing loans to be paid off. Personal loan funds are typically disbursed much more quickly. After your loan is approved, you might get your money in as little as one business day, depending on the lender.
- You might qualify even if you didn’t finish college: Although some lenders will refinance student loans if you didn’t finish college, many require you to have graduated to qualify for refinancing. Personal loan lenders don’t have this requirement.
- You could release a cosigner from your student loan: If you use a personal loan to pay off a student loan, your student loan account will be closed. If you had a cosigner on your student loan, they’ll be released from the account.
- Personal loans can be discharged in bankruptcy: Student loans are notoriously difficult to discharge in bankruptcy. Personal loans, on the other hand, aren’t subject to the same restrictions as student loans. This makes them easier to discharge if you have to declare bankruptcy later on.
Learn More: Refinancing Your Federal Student Loans
Disadvantages
While using a personal loan to pay off student loans could be tempting, here are some serious drawbacks to keep in mind:
- Most personal loan lenders prohibit using loans to repay student debt: When you apply for a personal loan, you have to sign a loan agreement that states you’ll abide by the lender’s terms. Most personal loan lenders have strict policies that prohibit paying for school with a personal loan or refinancing existing student loans with a personal loan.
- Personal loans have shorter repayment terms: Personal loans tend to have short repayment terms — often seven years or less. If you refinance your student loans instead, you might have as long as 20 years to repay your loans, depending on the lender and the term you choose. Federal student loan repayment options also typically come with much longer repayment terms.
- Personal loans typically have higher interest rates: Because personal loans can be discharged in bankruptcy, lenders see them as riskier forms of debt. To offset that risk, they charge higher interest rates than you’d get with student loan refinancing. This means you could likely get a lower interest rate by refinancing.
- Personal loans aren’t eligible for the student loan interest tax deduction: If you use a personal loan to pay off student loans instead of refinancing your debt, you’ll lose out on the student loan interest tax deduction. Depending on your income, you might be able to deduct up to $2,500 in student loan interest from your taxes, but personal loans aren’t eligible for this deduction.
If you decide to refinance your student loans, be sure to consider as many lenders as possible to find the right loan for you. You can do this easily with Credible — you can compare your rates from our partner lenders in the table below in just two minutes.
| Lender | Fixed rates from (APR) | Variable rates from (APR) | Loan terms (years) |
|---|---|---|---|
Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 4.85%+ | 5.3%+ | 5, 7, 10, 15, 20 |
|
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 6.8%+1 | 7.06%+1 | 5, 7, 10, 15, 20 |
|
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 6.99%+2 | 6.99%+2 | 5, 7, 10, 12, 15 |
|
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 6.0%+5 | 8.03%+5 | 5, 10, 15, 20 |
|
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 5.08%+3 | 5.28%+3 | 5, 7, 10, 15, 20 |
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 5.9%+4 | 8.12%+4 | 5, 10, 15, 20 |
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 6.94%+ 7 | N/A | 5, 7, 10, 15, 20 |
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 4.49%+ | 5.02%+ | 5, 7, 10, 15 |
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 5.75%+ | N/A | 7, 10, 15 |
|
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 5.34%+ - 10.79%+8 | 7.58%+ - 14.48%+8 | 5, 7, 10, 15, 20, 25 years8 |
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Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
| 5.79%+ | N/A | 5, 10, 15 |
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| Compare personalized rates from multiple lenders without affecting your credit score. 100% free! |
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All APRs reflect autopay and loyalty discounts where available | 1Citizens Disclosures | 2College Ave Disclosures | 5EDvestinU Disclosures | 3 ELFI Disclosures | 4INvestEd Disclosures | 7ISL Education Lending Disclosures | 8Nelnet Bank Disclosures |
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Paying for school with a personal loan: If you need to pay for school in the first place, keep in mind that private student loans typically have lower interest rates, longer repayment terms, and more repayment options than personal loans.
For example, with a private student loan, you might be able to defer your payments while you’re in school or even have a grace period after you graduate before you have to make payments.
If you decide to take out a private student loan, be sure to compare your rates from as many lenders as possible to find the right loan for you. You can do this easily with Credible — you can see your rates from multiple lenders in just two minutes.
Additional loan repayment options
If you take out a personal loan, you’ll make fixed monthly payments until the loan is paid — typically for one to seven years, depending on the lender. Private student loans function similarly, though you’ll usually have five to 20 years to repay them.
But if you have federal student loans, there are other loan repayment options in addition to the standard 10-year repayment plan, which might be a better fit for your situation than using a personal loan. Here are a few choices to consider:
- Income-driven repayment: If you sign up for an IDR plan, your payments will typically be 10% to 20% of your discretionary income — in some cases, this could bring your payments down to $0 per month. Plus, you could have any remaining balance forgiven after 20 to 25 years, depending on the plan you choose.
- Graduated repayment: With this kind of plan, your payments will start low and gradually increase over time. This could be helpful if you expect your income to rise in the future.
- Extended repayment: This type of plan allows you to extend your repayment term up to 25 years, which can reduce your monthly payments. There’s also an option for an extended graduated repayment plan — this will extend your term and give you payments that start low and increase every two years. Just keep in mind that you’ll pay more interest over time with a longer term.
- Student loan forgiveness: Federal student loan borrowers have access to a variety of student loan forgiveness programs, which can discharge some or all of your federal loan balance. These programs are typically available to borrowers who work in specific careers — such as doctors, lawyers, and teachers.
Keep in mind: You might be able to get a lower interest rate on a personal loan than you’re currently paying on a student loan — though this will generally require having excellent credit or a creditworthy cosigner.
Additionally, if you pay off your federal student loans with a personal loan, you’ll no longer have access to multiple repayment options.
Learn More: Can You Pay Your Student Loans With a Credit Card?
Is using a personal loan to pay off student loan debt right for you?
In some cases, using a personal loan to pay off education debt can be a good idea — especially if you can take advantage of a low interest rate. However, it’s important to carefully weigh the pros and cons as well as fully understand how personal loans work so you can make the best decision for your financial situation.
Tip: If taking out a personal loan seems like a good choice for you, be sure to shop around and consider as many lenders as possible. This way, you can find the right loan and most favorable interest rate for your needs.
Refinancing your student loans is usually a better way to manage your student loan debt. Through refinancing or student loan consolidation, you could get a lower interest rate or a lower monthly payment with an extended repayment term.
If you decide to refinance, it’s a good idea to shop around and compare as many lenders as possible to find a loan that works for you. Credible makes this easy — you can see your prequalified rates from multiple lenders after filling out a single form.
Find out if refinancing is right for you
See Your Refinancing Options
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