What to know about personal loans for college students

When financial aid, grants and scholarships do not cover the full cost of your college education, federal student loans should always be your first lending option. But if federal student loans, which have borrowing limits, aren’t enough, you may be wondering whether you should take out a personal loan or a private student loan to cover a shortfall.

While you may be able to get a personal loan with strong credit, a steady income, or a cosigner, personal loans are no better option than private student loans. This guide will help you understand the benefits of student loans over personal loans when it comes to paying college-related expenses.

Can I get a personal loan for school expenses?

People consider personal loans for many reasons. Personal loans usually have lower interest rates than credit cards. And they’re flexible, which means you can use them for virtually anything—even school expenses.

While it may be possible to get a personal loan as a student, it probably won’t be easy. Most of the personal loan lenders require good credit, stable employment and steady income.

Makes it easy to research reliable private student loans and compare rates from multiple lenders.

Benefits of Student Loans for School Vs Personal Loans for Students

One of the biggest benefits of using student loans instead of personal loans as a student is that student loans usually offer lower rates. In fact, personal loan interest rates are usually in the double digits, while student loan rates are typically less than 10%. By choosing a student loan, you can potentially save thousands of dollars in interest.

In addition, student loans are very easy to qualify for with no income or poor or no credit history. And they have flexible repayment options and long repayment terms. If you take out a student loan, you may have up to 10 years to pay it off. On the other hand, a personal loan will need to be repaid within one to five years.

Why you don’t need a personal loan for school: You can pay living expenses with student loans

College costs go far beyond tuition, housing, and school supplies. When your school decides how much you can borrow, it’s called “total cost of attendance.” This usually includes things that may not seem directly related to the school, such as personal expenses and transportation.

This means that once you’ve paid off your tuition, housing, books, and other direct school expenses from your student loan fund, you can use any remaining funds to cover personal expenses. – Even groceries for your dorm room.

difference between personal loan and student loan

Here’s a closer look at how personal loans and student loans work, as well as how they differ.

personal loan

With most personal loans, you get the lump sum amount upfront. You pay it back through monthly payments over an agreed-upon period, which can range from a few months to several years or more.

A personal loan can help pay for school expenses, car repairs, medical bills, vacations or any other expense. But getting approved for them can be difficult, unless you have good credit and a consistent income.

Most personal loans are unsecured – which means you do not need to deposit collateral to get the loan. Some, however, are secured, which means you will need collateral to get the loan.

Personal loan interest rates can be high depending on your credit. For example, in the week of August 30, 2021, five-year fixed-rate personal loans for borrowers with good credit (720 or more) averaged 16.51% who used the credible marketplace to select a lender Was.

student loan

Student loans are designed to help students cover the cost of school-related expenses. Even though they can only be used for school, they are usually easy to obtain, even if your credit is not in the best shape or you have a lack of income.

Federal Direct Loans should always be your first lending option for school costs. If federal direct loans don’t cover all of your expenses, you can opt for private student loans. The interest rates for private student loans are lower than for personal loans. For example, in the week of August 30, 2021, 10-year fixed-rate private student loans averaged only 5.29% for borrowers with good credit who used Credible.

Federal student loans to consider

If you need a loan for school-related expenses, always exhaust your federal student loan options first. This includes:

Federal Direct Subsidized Loan

Federal Direct Subsidized Loans are for graduate students with financial need. If you’re eligible for them, the government will cover the interest during a certain time period, such as when you’re enrolled in school at least half the time, and a grace period of six months after you leave school.

Federal Direct Unsubsidized Loan

Federal Direct Unsubsidized Loans are like Federal Direct Subsidized Loans, but they are available to both undergraduates and graduates. You don’t even have to demonstrate financial need to qualify for them. With a Federal Direct Unsubsidized Loan, you are responsible for paying all interest on the loan.

Federal Direct PLUS Loans

Graduate PLUS loans are for undergraduate or professional students, and the student is the primary borrower. Parent PLUS loans are for the parents of dependent graduates, and the parent is the primary borrower. These loans are designed to cover the remaining cost of education after you have borrowed the maximum limit of unsubsidized and subsidized loans.

Private Student Lenders to Consider

Once you have exhausted your federal student loan options, you can turn to private student loans. These eight trusted partner lenders offer private student loans that can help you pay for educational expenses when federal loans aren’t enough.

ascent

Loan Amount: $2,001 to $200,000

Loan terms: five, seven, 10, 12, 15, or 20 years

Discounts: Graduation Rewards, Autopay Discounts

Fees: No application, origination, or disbursement fees

citizens

Loan Amount: $10,000 to $750,000

Loan terms: five, seven, 10, 15, or 20 years

Discounts: Autopay Discounts, Loyalty Discounts

Fees: No application, origination, or disbursement fees

College Avenue

Loan amount: $1,000 up to 100% cost of school-certified attendance

Loan Terms: Five to 15 years

Discounts: Graduation Rewards, Autopay Discounts

Fees: No application, origination, or disbursement fees

custom options

Loan Amount: $1,000 to $99,999 annually

Loan Terms: Three or five years

Discounts: Autopay Discount, Graduation Principal Reduction

Fees: No application, origination, or late fees

edwestinue

Loan Amount: $1,000 to 100% cost of attendance

Loan Terms: Seven, 10, or 15 years

Discount: Autopay Discount

Fees: No application, origination, or disbursement fees

Investment

Loan Amount: $1,001 Up to 100% of the cost of attendance

Loan Terms: Five, 10, or 15 years

Discount: Autopay Discount

Fees: Late fees and refunded payment fees but no application, origination, or disbursement fees

MEFA

Loan amount: $1,500 up to certified cost of attendance

Loan Terms: 10 or 15 Years (Graduate), 15 Years (Graduate)

Discount: none

Fees: No application, origination, or disbursement fees

sally mae

Loan amount: $1,000 up to 100% cost of school-certified attendance

Loan Terms: 10 or 15 years

Discount: Autopay Discount

Fees: No application, origination, or disbursement fees

You can compare private student loan rates from these lenders using Credible.

When it makes sense to get a personal loan

While student loans are almost always the best option for paying for college expenses, personal loans can be valuable financial tools in other situations.

After you leave school, a personal loan can be a good option for many uses. For example, if you have high-interest debt, a personal loan can help you consolidate it into a single, affordable monthly payment. You can also use a personal loan to pay for medical bills, home repairs, or big-ticket purchases like furniture or appliances.