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Personal Loans for College Students: What You Need to Know
6 Sep 2018

Personal Loans for College Students: What You Need to Know

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College is necessary. Right?

But the debt it incurs turns many potential students away. As of this year, the average student loan borrower has $37,172 of student loan debt. Thirteen years ago, that number was $20,000 less.

How can college students expect to pay such stupendous amounts of money and pay their bills?

One solution is personal loans.

But how do they work and how can college students benefit from them? Here, we’ll provide all the answers to your questions about personal loans for college students.

What Are Personal Loans for College Students?

personal loans for college studentsThere are so many loan types they can all become a dizzying array of names, so let’s cover our bases.

A personal loan is money borrowed from an institution to finance personal expenditures. They cannot be used for business or personal use.

Personal loans are frequently used for the following reasons:

  • Education
  • Medical fees
  • Home improvement
  • Emergencies

Borrowers pay the loan back in fixed monthly installments. The installments last anywhere from two to five years.

Each loan has an interest rate, a portion of the loan that accrues as it is being paid off. Interest rates for personal loans range from 7% to 36% APR.

Rates for personal loans are often cheaper than credit cards, and amounts users can request are higher.

Students, of course, can use a personal loan for living expenses, textbooks and other necessities for surviving their long college years.

Catering to Students

Personal loans should be used for tuition only after all other avenues have been explored. Scholarships, grants and federal aid should be an undergrad’s or grad’s primary means of paying tuition, but there are instances where personal loans can aid students.

Before attending college, many students forget about the costs beyond tuition. Rent, textbooks, laptops and the like are necessary for succeeding at school. However, university and government aid only go so far, and they very rarely extend to these expenses.

A college student could take out a credit cards for college students with no credit, but relying on it for these supplemental costs is a risky gambit.  best credit cards for college students with no credit

That’s where personal loans come in. Students can take out these loans to cover the expenses needed to survive during their college years. They can also help pay for tuition that isn’t covered by other aid.


Student personal loans have strict requirements to ensure the loan holder is not supplying funds that won’t be paid back. Furthermore, as the cost of college increases, so does the interest on student personal loans. Consequently, qualifying for a personal loan can be a bit intimidating.

Students must meet these requirements:

  • The student is enrolled at least half-time at college.
  • To be a sole borrower, a stellar credit history is necessary. Cosigners are required if there is little or no credit history and/or the individual has a poor credit score.
  • Students must prove they have adequate income to make payments.
  • The student and cosigner must sign a promissory note that guarantees repayment.


There are several types of personal loans. Students should be familiar with the various forms to ensure they fully understand the requirements associated with borrowing.


Most student loans are unsecured, meaning collateral is not necessary to borrow money. As a result, these loans have higher interest rates.


Secured student loans are not as common as unsecured. They require a borrower to have adequate assets or collateral. Those assets are possessed by the loan issuer if he or she fails to repay the loan.

Because this is a safer investment for banks, interest rates are lower.

Variable Rate

If a student takes out a variable rate personal loan, the interest rate will fluctuate throughout the loan’s term. The bank has benchmarks that determine the rate, which then affects your monthly payments.

Consequently, the amount you pay per month varies. Since this is a hindrance for students, banks typically offer lower annual percentage rates (APRs).

Fixed Rate

Fixed rate personal loans have a set interest. The amount borrowers pay per month does not change for the duration of the loan.

These have higher APRs than variable rate loans.

Is It Right for Me?

College is tough, and taking out personal loans is a decision that students should make carefully.

To determine if a personal loan would benefit you, ask yourself these questions:

  • Do I need funds on top of what is offered through my school and government loans?
  • If I’m using a personal loan to pay leftover tuition, can I afford the monthly payments?
  • Do I need money for additional materials to be successful in college?
  • Am I considering a summer session?
  • Have my expenses suddenly changed, making it difficult to pay my costs of living?

If you answered “yes” to one or more of these questions, a personal loan for school could be the right choice.


It is vital that students fill out their FAFSA form and apply for other types of aid before turning to personal loans. These loan types are best used as a supplement for the costs other financial aid doesn’t quite cover.

Students should consider the difference between personal and private loans. Private loans, such as government student loans, do not require repayment until after school. Further, payment plans that cater to the student’s personal circumstances are offered.

The opposite is true of personal loans. Students must make payments immediately, and payments will not be based on income or current financial situations. The ability for a loan to go into deferment or forbearance, where loan payments are delayed due to extenuating circumstances, is not available.

Furthermore, students should always take the time to research and compare loan options from different banks. Never sign anything if you do completely understand its requirements.

While this may sound discouraging, students need to remember that personal loans can make all the difference during school. They can decrease financial stress and allow students to focus on their education. Further, they may allow students to live comfortably and purchase the items they need to succeed.

If used responsibly, personal loans are an excellent choice for a college student.

Finding Aid

Understanding the nuances of personal loans for college students makes a huge difference in a pupil’s educational career. Students won’t have to worry about how they will pay for textbooks or fill their car’s gas tank. Instead, they can fuel their energy toward what matters: their education.

If you are interested in a loan for college, read all about our personal loans for students and to discover how you can secure a loan today.

College doesn’t have to be the most stressful time of your life. Instead, make it the most enjoyable.