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Being a college student is financially demanding. College tuition and fees keep rising, along with living expenses like rent, groceries, utilities, and transportation that can quickly eat up a college student’s spending cash and part-time earnings.

Many students look to personal loans to help them cover extra costs while in college. However, a personal loan may not be the wisest financial choice, especially if a private student loan can be used to cover many living expenses instead.

Personal loans for college students – when are they needed?

In theory, you can take out student loans up to your school’s certified cost of attendance. Allowable expenses that can be paid for with student loans include tuition and fees, room and board, books, supplies, transportation, and dependent care. But it’s pretty easy to bump up against your annual borrowing limits for federal student loans, which haven’t been increased since 2008.

If you’re a dependent student, you can take out $5,500 in federal direct student loans as a freshman, $6,500 as a sophomore, and $7,500 as a junior or senior. Independent students can take out $9,500 as freshmen, $10,500 as sophomores, and $12,500 as juniors or seniors.

With tuition, fees, room and board now averaging $26,593 a year at four-year colleges, it’s easy to see how students can hit their limits on the most affordable federal student loans.

This is where you might think a personal loan would come in handy. A personal loan is sent directly to you and allows you to control what the money is used for. The student is in charge with dictating how much money is needed, and the bank lends the student money without the school being the middleman.

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Should college students avoid personal loans

The main problem with personal loans for college students is that they can be expensive. Since college students typically have lower credit scores, banks view them as a higher risk. This then gives the bank the freedom to charge high interest rates for these loans. Do you really want to be paying for your college groceries and rent way into your 30s?

Most personal loans for students will also require a cosigner. For some students, it is easy to secure a worthy cosigner, while others students will have hard time finding the ideal candidate. Personal loans might require students to also show proof of adequate income, which might also present a problem for many students.

Unfortunately, high educational costs today mean that many students will graduate with debt. For a student with few financial options, a personal loan might be necessary to be able to concentrate on schoolwork and focus on obtaining a college degree.

Federal PLUS loans instead of personal loans?

Once students hit their annual borrowing limits on the most affordable student loans, they often turn to federal PLUS loans. PLUS loans are available to graduate students and parents of undergraduates, and you the only borrowing limits is your school’s cost of attendance, minus other aid you’ve already received.

One problem with PLUS loans is that they carry the highest interest rates and fees of any federal student loan. Make sure you understand their pros and cons before resorting to PLUS loans.

Private student loans for personal expenses

To cover personal expenses, private student loans might be a better option than personal loans or PLUS loans. Private student loans may offer lower interest rates than personal loans or PLUS loans. Although you’ll typically need a cosigner, a cosigner can also help you get a better rate.

And unlike personal loans, many lenders allow students to wait until after they graduate to begin repaying private student loans Private student loans can cover a wide range of educational expenses, including college dorms and apartments, travel to and from school, food, study abroad opportunities, and a student computer.

While you might not be able to fund your Cancun spring break trip with a private student loan, you are able to live on or near campus and have all of your needs paid for while going to class.

In the end, you may find a personal loan for students to be a necessary last resort. It’s a good idea to compare your other — including PLUS loans and private student loans — to find the right loan that meets your needs now and in the future.

To learn more about private student loans and personal loans and compare rates, visit Credible.

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