Should You Use a Personal Loan to Pay Off Student Loan Debt?

For many people looking to get their finances better under control, one of the first major stops is managing debt. If you’ve borrowed money to pay for higher education in the past, the chances are high that you have some student loans debt to deal with. In fact, you’re not alone. The United States has an aggregate of $1.6 million in student loan debt — second only to mortgage debt.

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In this article

    A popular question you hear from people is, “Can I use personal loans for student debt?” While this may be possible through the best student lenders, there’s a lot to unpack and consider before choosing personal loans for your student debt.

    Should you use a personal loan to pay student debt?

    Generally speaking, it’s usually not the best idea to use a personal loan to pay off your existing student debt. There are two main reasons for this.

    1. Many personal loan lenders won’t let you do it. When you sign for your loan, you’ll most likely have to agree that you’re not using the loan to fund current education costs or to pay for past student loans. You may be able to find a lender that allows it, but there’s a reason many lenders don’t condone this activity.
    2. There are better options. This can include things like refinancing your student loan, taking advantage of special programs or restructuring the way you’re paying off your debt. These other options exist to help you out whether you’re looking to stay up on your payments to avoid defaulting, lower your monthly payment size or save money on the overall cost of borrowing.

    [ Read: Is a Personal Loan My Best Option? ]

    Pros and cons of using a personal loan to pay student debt

    Pros of using a personal loan to pay student debt

    • Personal loans generally don’t require collateral and have lower borrowing requirements than some other types of funding.
    • If you have someone who has cosigned on your student loans, taking out other funding to pay off and close that account can release them from their obligations.

    Cons of using a personal loan to pay student debt

    • Most lenders won’t allow you to use your personal loan to pay off your student debt. As it’s not an advised practice by many, you’re going to be hard-pressed to find a lender willing to let you borrow money to refinance a student loan or make debt payments.
    • Generally, personal loans are unsecured, which is nice for approval but means you’re most likely looking at a higher interest rate. This might help you lower monthly payment sizes in the short term, but it’s going to raise the overall cost of borrowing in the long run.
    • If you have bad credit, the interest rate on a personal loan will greatly outweigh the rate on a student loan. Typically, student loans have 12% APR or lower — no matter your credit. On the other hand, bad credit personal loans can have APRs starting at 35% and go up to 200% in some cases.

    [ Read: Pros and Cons of Taking Out a Personal Loan ]

    Alternatives to using a personal loan to pay off student loans

    Whether you’re looking to save money, lower your payments or change the way you repay your student loan debt, there is good news — you have options. There are several useful alternatives that may be a better fit for your situation than trying to use a personal loan for your student loans.

    Refinancing student loans

    Refinancing is the process of taking out another loan to pay off an existing loan. You’re then only bound by the terms of the new loan, as the old loan has been paid off. Many lenders have options to help you refinance your personal student loans. While similar to using a personal loan, the main difference is the lending products are designed with student loans in mind.

    [ Next: How to Deal With Student Loan Debt ]

    The benefits that come with refinancing are plentiful — and it’s very similar to debt consolidation. You have a lot of flexibility in how the remainder of your loan is going to be paid off. If you’re looking for lower payments or you’re looking to take advantage of better interest rates, both options are available.

    Additionally, the new loan company may have more favorable repayment terms and/or additional plans in place that protect you in case your financial situation changes in the future. In a nutshell, refinancing your student loans gives you a chance to rework the terms of your agreement. Be aware that you will have to pay some of the same fees you paid when you initially took out your first loan, which you will need to factor into the costs.

    Federal student loan forgiveness

    If you currently have federal student loans, you have a lot of additional options that aren’t available to people with private student loans. First, you can apply for an income-driven or income-based repayment plan that considers your previous year’s income to determine your monthly payment. This is a great option that can really help out, especially in times where your income has changed, and you’re worried about defaulting.

    But even better, some student loan borrowers may be eligible for federal student loan forgiveness. The Federal Student Aid office has several plans available that can eliminate what you owe on your loans. Some of the more popular plans include the Public Service Loan Forgiveness Plan, the Teacher Loan Forgiveness Plan, the Closed School Discharge Plan and the Total and Permanent Disability Discharge Plan.

    Each of these plans comes with its own set of eligibility requirements that you will need to meet to qualify. But if you do qualify, it’s some pretty great news to hear that you don’t owe any more on your student loan.

    [ Read: The Best Bad Credit Personal Loans ]

    Jason Lee

    Contributing Writer

    Jason Lee is a U.S.-based freelance writer with a passion for writing about dating, banking, tech, personal growth, food and personal finance. As a business owner, relationship strategist, and officer in the U.S. military, Jason enjoys sharing his unique knowledge base and skill sets with the rest of the world. Follow Jason on Facebook here

    Reviewed by

    • Courtney Mihocik
      Courtney Mihocik
      Loans Editor

      Courtney Mihocik is an editor at The Simple Dollar who specializes in personal loans, student loans, auto loans, and debt consolidation loans. She is a former writer and contributing editor to,, and elsewhere.