Personal Loan To Pay Off Student Loan

Learn about personal loans and how it be used to pay off student loans. Its pros & cons, alternative options to be considered instead of personal loans

Updated by Gowtham Ramesh on 10th June 2019

If you are in the repayment of students loans then you must be in a hurry for closing the loan sooner and you are constantly in a search to pay off the balance debt. One known factor is that people use personal loans to pay off their student loans.

Generally, Personal loans are unsecured loans which state that you are not supported by any sort of collateral to get you things like cars, house, and bonds.

The charm of personal loans is that it differs from the mortgage, student loan, and car loan in that you can really use the money however you need. It can help you to redecorate the house or even pay off the credit card by consolidating, even more, personal loans can offer you a much better rate of interest compared to the credit card.

Can you use a personal loan to pay off student loans? Let's get what you need to understand and know if using a personal loan to pay off student loan debt is the right move.

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Personal loans to pay off a student loan

A personal loan is a way to pay off student loan quicker and faster under newer conditions. Usually, the loan has durations with a decided amount during the loan timeline.

Personal loans generally do not have any fines or advance payments and it might affect your credit score as similar to the student loans does. They are not totally different from your student loans in that, you are just using a newer loan to pay off an old student loan.

If you are in a hurry to pay off your student loan, you can consider the personal loans but it has its pros and cons.

Pros and Cons

There are certain things needs to be considered before making use of the personal student loan. In total making use of student loan to refinance your student debt might cause you problems.


  • If you want to move with paying off your student loan with a personal loan then its benefits you as such.

  • Consolidation of your multiple student loans can be done to make a single one monthly payments.

  • You might able to get a lower fixed rate of interest

  • The fixed rate of interest and fixed repayment term can be a benefit to you.

  • The personal loan can be dischargeable in bankruptcy.

  • Paying off your student loan can help you release your cosigner faster.

  • The duration of personal loans is shorter where it can help you to pay off as fast as possible.


If you are using a personal loan to pay off then you cannot use benefits such as forbearance and deferment from a federal student loan or lesser payment facility from private lenders. Try to see if there are any benefits available for you to make use of before diving into it.

Interest is not tax-deductible

You won't be able to deduct your student loan interest if you have paid it off using a personal loan. The debt with the personal loan is listed as no tax benefit for the student debt.

Students loan holders can deduct around $2,500 under student loan interest where it can be adjusted in the total income if its less than $80,000.

Abandon of student loan protection from federal

  • If you use your personal loan to pay off student loan then you cannot redo it. You cannot get back to the federal student loan and you also abandon the perks such as Income-driven plans and the loan forgiveness.

  • The federal loan program provides you a wide range of repayment programs when it comes to flexibility which is not available in the personal loan. It even provides you a payment based on your income in the case of the federal plan.

  • If you are facing trouble in payment then the federal student loan has tons of options to keep it in the hold. But you cannot do it in the personal loan.

The interest rate is higher than the student loan

In the student loan, the rate of interest is lower than the personal loan. The refinancing of student loan starts at 1.95% where the lowest personal loan starts at 3.50%.

It's hard to get a personal loan to pay off student debt

Lenders generally don't allow you to pay off student loans with personal loans, only some might. So, before you go applying do make sure to check whether the lender allows you to use the personal loan to pay off the student loan debt.

You need to qualify for a personal loan and you need to have good credit, well-balanced income from a steady source you need to satisfy all the terms and conditions to be considered for one.

You generally have limits on the loan amount that you are getting as the personal loan don't have any support of collateral. Further, if your credit is new, the lender may neglect the loan as he doesn't see any history of credit in the higher amount of loan demanded.

Alternatives to pay off student loans

If you are not clear about using a personal loan to pay off student loan debt there are few other options such as

Federal repayment plan option

If you have federal student loans then you might have different kinds of repayment options available for you. Where if you go with a standard repayment plan, you get to pay off your student loan in 10 years.

If you are applying for an income-driven repayment plan then your income will not support the student loan payment as it needs to match with your income and you need to make sure that you can manage it. Moving to income-driven plans could help you save money by reducing the amounts.

Public Service Loan Forgiveness (PSLF) is another great option where you work under the public sector. If you make use of the personal loan to pay off the student loans, you will be giving away the protection and flexibility of federal benefits.

Look for refinancing

If you are looking to pay off the debt faster and save more on interest then consider refinancing your student loan into a newer student loan before heading into the personal loan.

A student loan can be refinanced by companies who help the borrowers to consolidate their student loans and save them money on the interest from the lower interest rate.

Furthermore, some refinancing companies like SoFi and CommonBond do have unemployment protection where it allows you to hold the payment while you are in search of jobs.

Personal loans cannot provide you this type of support and further, you might not get a lower interest rate here.

Best ways to pay off student loans

Make more payments

The easiest and effective ways to reduce your debt is by making payments more frequently than your normal rate with an additional amount to it. Here you would have already made payments made more than required payment for the year. An effective way to do it by making auto debit and add the excess amount too.

Find out the payoff date

Look for the exact due date when you will be free from all the debt and find out your payoff date so you manage it better and once you have the dates start working towards it.

A simple way to find the date is to go to the National Student Loan Data System and access the federal loan, make a note of the dates and confirm it across with the services.

Consolidation and Refinancing

Refinancing of your student loan can be a better move towards the paying off your student debt at a faster rate. The goal regarding refinance is to reduce the interest rate where you can make more of your payment towards the debt.

Refinancing multiple loans merges it into a single consolidated loan with one payment every month rather multiple ones.

Look for forgiveness jobs

A number of jobs get qualified for Public Service Loan Forgiveness(PSLF) where you get forgiveness on the remaining loan balance once you are working with the public service work or teaching. If you meet the required qualifications then the balance of your loan will be forgiven. 

You need to complete your work term in order to get qualified. As forgiveness is used in combination with income-based repayment plans.

Look for raises

Look for ways of having a rise in income and instead of taking a trip to the Bahamas or getting a gadget and electronic, use that money for paying off some of the pending student loans.

Avoid repayment plans

Lower your student loan payments since it makes a lot of work easy. If your goal is to pay off student loans faster then avoid then income-driven repayment plans.

Repayment programs are directed towards the lowering of payments by extending the terms. It can go for a longer time of period ranging from 10 to 20 years. Direct loan consolidation might be faster as you can find the higher rate of interest loan and pay extra after the consolidation process gets over.

Make frequent payments

Another great payment strategy for the student loan is to make frequent payments at least once in 2 weeks. This can boost the number of your monthly payments to work. This approach relives you of the burden of entering into default in your student loan payments.

pros & cons, alternative options, other loans and the best way to pay off

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By making this you can come to full extra payment on the year. This strategy helps to ease the tension, making the borrower not to feel the pain of paying more or extra.


Other ways to pay off student debt

If you are currently looking for the best way to get your student loan debt, then you need to take your time to consider using the personal loan or a home equity loans too.

These options might not be fit for everyone if you are going to get it then you need to go through all the pros and cons. There even other several benefits to paying off of your student loans through other forms of credit.

Conversion to dischargeable debt

The most commonly faced issue when it comes to students loans is the debt is that it is not dischargeable in bankruptcy. This is a true fact whether you graduated or not.

Some borrowers might be relying on bankruptcy to get help and relief from their financial pressure or any other type of credit obligation but a bankruptcy relief from your student s loan is not available. Under certain exceptional circumstances, using other loans to pay off the student loans and removing the possible barrier makes that new loan eligible for a bankruptcy discharge.

However, you should never take any loan with the thought of including it to the bankruptcy in the near future because this will be termed as a fraud.

Credit Reporting

Another problem on a student loan is when your loans are in default and unpaid then you don't have a credit report on the closing date. The unpaid student loan is in default can haunt your credit score.

Fair Credit Reporting Act (FCRA) is a law that monitors and governs the credit reporting time, but it doesn't address federal student loan at all. These accounts are monitored on behalf of the higher education act where it says unpaid defaulted student loan debt is permitted to remains on your credit report forever.

While paying off your student loan debts with other types of loans, keep in mind that the new debt will get through credit reporting limitations.

No loss of government benefits

If your student loan goes into default then you might be in severe consequences. These loans are typically ineligible for bankruptcy discharge and you cannot remove student loan accounts resting from your credit report forever

If you default in the student loan, the government can exercise extreme steps in order to collect the debt. The wages which can be garnished and tax refunds can be delayed and kept for the outstanding debt. A part of your social security payments can also be held. This can cause you multiple financial hardships if you have no other source of income.


Personal loans have various options to be considered before using it to decrease the student loan interest rate. It even has many lenders in the market where they offer you personal loans to pay off the students loan.

Refinancing might pay off your old loans for you and typically has a low rate compared to a personal loan.  Based on your need to use refinancing or personal loan to pay off your pending student loans, try to consider all your options.


  Can I use Personal loan to pay for school?

You cannot make use of your personal loan to pay off your college tuition. You can either use one of your expenses, but it will not be lower or on the safer side options. Personal Loans cannot be used on the paying off your college education, It may even tempt you to get more for making your life better.

  Does personal loan affect credit score?

A personal loan is a monthly payment loan where it won\'t be hurting your credit score as similar to the credit card of yours. It has a limit and by making use of the available credit at better accessible way. The personal loan can help you in various credit types.

  Can you negotiate a payoff on a student loan?

If you can call your lender and state your matter and explain him the reasons and you may not able to get it the short and simple way to get it is to pay off your balance in full. Where they earn in the basis of interest and fees that come out of your loan. so it might be a dual win if you pay it in full.

  Should I get a personal loan to pay off student loans?

The key point that you need to benefit is by getting a reduced amount of interest where it may get you a lower rate personal loan, It also difficult to get a personal loan to pay off the student loan debt of yours. As they cannot able to move or confirm the paying off your loans.

  Does paying off a loan early hurt credit?

Even if you pay off the remaining balance of loan the account will remain open also while paying off your instalment loans early it won\'t hurt your credit score. Keeping the account open and making the payments on due is considered as absolutely a good model of scoring and it can help you in the credit score.

  Is a Personal loan better than a student loan?

Generally, Private students loans have a lower interest rate and cost when comparing to the borrow of personal loans.  If you are getting it for the purpose of paying off the educational expenses or refinance student debt, Private student loan can be a preferred choice rather a personal loan to pay off soon.

  Is it smart to get a personal loan to pay off student loans?

In certain cases, taking personal loans can be a good way to pay off your student loans faster and quicker. But, you need to have access to the lower fixed rate of the loan by making use of the personal loan. Where they usually stay for a short time and you are focusing on the goal then this is a quicker way.

  Can I pay back my student loan in a lump sum?

The lump sum can help you in getting a lower interest rate. With a condition that money which was borrowed need to be covered for education cost where you are expected to pay it back along with the interest. So, if you are paying around $ 6,000 for the debt under a lump sum then you can make use of the regular payments where you can save around $3,000 on the interest.

  Should I pay off my student loans with a credit card?

Generally, students cannot able to pay student loans with a credit card, But the borrowers who are given the option can consider this based on the credit they have and repayment capacity before opting for it. In total avoid credit card to pay off your student loans.

  Is it better to pay off student loans?

Federal loans usually have a lower rate of the interest rate plus it brings other perks too such as income-driven repayment options comparing to the private loans.