The cost of college is a huge expense for many families. The average annual cost of attendance for first-time, full-time undergraduate students living on campus at four-year institutions ranged from $14,700 for public institutions (including grants and scholarship aid) to $55,800 for private nonprofit institutions (not including grants and scholarship aid) in 2021–22.

Not everyone has that kind of cash on hand, so some might need to borrow money to pay for college. This may warrant getting a personal loan for school, depending on your financial circumstances.

Should You Get a Personal Loan for School?

Borrowing money to pay for school is already a common practice, with federal student loans and private student loans. But these funds are typically sent directly to your college—not you—when you take them out. If you want more control over how to pay for college and related expenses, then you might want to get a personal loan.

Keep in mind that many lenders restrict personal loan usage and may not allow you to borrow money to pay for college expenses, such as tuition. However, you might be able to pay for other expenses, including housing costs, living expenses, child care costs, and transportation needs, with a personal loan. That way, you can devote your other awards or student loans to school-specific needs.

You may want to consider getting a personal loan if:

• You don’t qualify for other types of funding, including federal and private student loans
• You need money to pay for many different things, including school-adjacent expenses along with other costs
• You’ve exhausted all of your other borrowing options

What Is a Personal Loan?

A personal loan is a type of funding that you can use to pay for practically anything—that’s what makes them personal. Students can use personal loan to pay for:

• Child care or adoption costs
• Wedding or funeral expenses
• Consolidating debt
• Paying off outstanding bills, such as medical bills
• Home repairs or renovations
• Emergencies or unexpected expenses
• Moving or relocation costs
• Vehicle financing

You can’t use a personal loan to pay for college tuition, business expenses, or a down payment on a home.

Most lenders offer unsecured personal loans, which don’t require collateral to get your money. But in those cases, your credit score, credit history, and income are the most important factors in determining your approval and how much you can qualify for.

How Do People Use Personal Loans?

daftarlapak303.commissioned a national survey of 962 U.S. adults between Aug. 14, 2023, to Sept. 15, 2023, who had taken out a personal loan to learn how they used their loan proceeds and how they might use future personal loans. Debt consolidation was the most common reason people borrowed money, followed by home improvement and other large expenditures.

Alternatives to Personal Loans

A personal loan is one way to pay for school-related costs, but it’s not the only one. You can pay for school through other means, including:

• Scholarships and grants: Any kind of free money should be the first thing you seek out when financing a higher education. This includes scholarships, grants, and even money you receive from family. Free money means you don’t have to pay it back, so it’s a good idea to look into all of these options before borrowing.
• Federal student loans: Federal student loans are loans backed by the federal government. They usually come with low interest rates, and for many student loans, there’s no hard credit check to get a loan. Repayment terms are usually lengthy, and there are many to choose from based on your income and needs. Anyone who needs one can apply every year through the Free Application for Federal Student Aid (FAFSA). Only federal student loans are eligible for debt forgiveness.
• Private student loans: These types of student loans come from private institutions, like banks, credit unions, and online lenders. You can apply for one of these anytime you need them throughout the year, but most students will likely need the help of a co-signer to qualify for a private student loan (or to get the lowest interest rate offered). Interest rates tend to be higher than with federal student loans, and there are usually fewer repayment options.

How to Compare Lenders

Every personal loan lender has a different set of eligibility requirements. It’s important to check out what you’ll need to qualify before applying for a personal loan. You should compare lenders based on:

• Loan types: See how much you can borrow and if it’s enough to cover all of your school-related needs. Some lenders restrict how much you can borrow based on your creditworthiness. Others have specific repayment periods based on how much you borrow.
• Usage: Many personal loan lenders have a few restrictions on how you can use your loan. Check to see if your potential lender specifies that you can’t use personal loans for educational purposes.
• Interest rates: Interest is what you pay the lender for the privilege of borrowing a loan. The higher your interest rate, the more you’ll pay on top of your principal balance, or the amount you originally borrowed.
• Repayment terms: Your repayment terms are how long you have to repay your loan. Many personal loans require you to start repayment right away, even if you’re currently enrolled and attending classes. Private and federal student loans let you start repayment after you leave school with a six-month grace period. Personal loans tend to have shorter repayment terms as well—around five years, compared with 10 or upward of 30 for student loans.
• Fees: See what fees are charged by lenders on top of interest and your principal balance.
• Discounts and deals: Some lenders might offer a discount when you link your bank account to your loan and enroll in auto pay.

It’s a good idea to compare different types of loans from multiple lenders based on your needs, and see which ones offer the best terms for you.

What You Need to Apply for a Personal Loan

A personal loan has different requirements than a student loan, including:

• Income: You might need to prove you earn a steady income and can repay your loan when repayment starts. You may need to show pay stubs, tax returns, or W-2 forms.
• Credit history: Because most personal loans are unsecured, you need to prove you’re responsible enough to repay your debt and have a solid credit history. The higher your credit score, the more likely you are to get approved for the lowest interest rate offered. If you don’t have enough credit to stand on your own, then you may need to enlist the aid of a co-signer.
• A reason: Most personal loan lenders require you to share why you’re taking one out, even though you can usually use a personal loan for almost anything you need.

Pros and Cons of Personal Loans for Students

Pros

• Can borrow whenever you need to: Unlike student loans or scholarships and grants, you can borrow a personal loan anytime throughout the year. There aren’t any deadlines, and if something falls through, you might not have sufficient time to get funding elsewhere. 
• Fast funding: Most personal loans get disbursed within a day or two after getting approved. The money goes straight into your account and not directly to your school.
• Better than credit cards: Personal loans tend to have lower interest rates than credit cards do. A personal loan could be a cheaper option than putting a school purchase on your credit card.

Cons

• Expensive option: Personal loans tend to have higher interest rates than federal and private student loans do. Repayment terms are also much shorter, which means larger monthly payments. 
• Repayment starts right away: Federal and most private student loans give students a six-month grace period after they leave school. Personal loan lenders require repayment to start right away.
• No protections or forgiveness: While some personal loan lenders have hardship options, you only qualify on a case-by-case basis, and it’s ultimately up to the lender. The only way most personal loans are forgiven is if you die. But if you have a co-signer, they could be responsible for repaying.

The Bottom Line

Personal loans can be a useful tool for funding a higher education, ideally by covering education-adjacent expenses that fall outside the typical purview of a student loan. Relying entirely on a personal loan to pay for college may not be feasible, and even if this weren’t the case, it would likely be more costly in the long run. Be sure to investigate whether you can get any scholarships, grants, and student loans first, and then consider using a personal loan to fill in any gaps if necessary.