Can I Use a Personal Loan To Pay Off My Student Loans?

A personal loan may help you repay your student loan debt

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If you’re struggling to repay your student loans, you’re not alone. The changing economy has made this a particularly difficult time for people from all walks of life. As you explore your options, you may wonder whether you can use a personal loan to pay off your student loans. The short answer is yes, but before deciding whether it’s the right move for you, consider other options and details so you can make an informed decision for your unique situation. 


On Tuesday, Nov. 22, 2022, the Biden administration extended the pause on payments and interest on federal student loans for the eighth time. Borrowers with federal student loans won’t have to make payments, and loans won’t resume accumulating interest, until 60 days after court cases challenging Biden’s student loan forgiveness program are resolved or the Department of Education is allowed to move forward with the program. If the cases aren’t resolved by June 30, 2023, payments will resume two months after that.

Key Takeaways

  • Refinancing is essentially moving your debt from one source to another.
  • Federal student loans offer multiple repayment options and flexibility, whereas private loans tend to be more rigid.
  • If you do qualify for a personal loan, your interest rate may not be much lower than a federal student loan rate.
  • Income-based repayment plans can help you lower your monthly payments and potentially qualify you for loan forgiveness in the future.

Paying Back Student Loans

Using a personal loan to pay off your student loans just means swapping one kind of debt for another. You may get a different interest rate and loan term, but that’s pretty much it. You’ll still be locked into monthly payments until the debt is paid off.


On Aug. 24, 2022, President Joe Biden announced via Twitter the cancellation of $10,000 of federal student loan debt for eligible borrowers, and $20,000 for federal Pell Grant recipients.

Before applying for a personal loan, consider all of your options for paying back your student loans. There are ways to compromise with your loan servicer while staying in good standing.

  • Forbearance: Forbearance allows you to temporarily stop making payments on your student loans. During that time, interest will accrue on your loan balance. 
  • Deferment: Deferment works similarly to forbearance. The major difference, however, is that your balance will not accrue interest.
  • Income-driven repayment plans: The U.S. Department of Education offers four repayment plans for federal student loans that are meant to keep monthly payments manageable, based on your income and the number of people in your family.
  • Consolidation: When you consolidate your loans, you combine multiple federal student loans into one so you can make a single, more manageable monthly payment. That can allow you to extend the term of your loan and lower your monthly payments with a new interest rate.
  • Refinancing: Refinancing occurs when you replace all of your private and/or federal student loans with another personal or student loan from a private lender. With this strategy, you may be able to secure a lower interest rate and save money. However, refinancing federal loans cancels out any protections and benefits that came with them.


In response to COVID-19, the federal government automatically placed federal student loans into forbearance and reduced interest rates to 0%. In March 2021, this relief was expanded to include defaulted Federal Family Education Loans (FFEL) held by private parties. Any garnished wages or tax refunds occurring after March 13, 2020, will be returned to the borrower, and the defaulted loans returned to good standing. 

If none of these is a viable option, then a personal loan may be the right move for paying back your student loans. Refinancing your student loans is similar to applying for and using a personal loan for your student loan debt, so it’s important to look into that option first.


On Aug. 24, 2022, President Joe Biden’s administration proposed a new plan for federal student loan repayment for undergraduate loans. The plan would cap monthly payments at 5% of your monthly income. After 10 years, whatever remaining balance you have would be eliminated if the original loan balance was $12,000 or less.

Personal Loan vs. Refinancing Student Loans

According to Jared Andreoli, Certified Financial Planner (CFP) and president at Simplicity Financial, refinancing is usually more favorable than a personal loan, because you’ll likely be able to land a lower interest rate. 

Refinancing is also a simpler process, as the lender will pay off your previous student loans automatically. With a personal loan scenario, however, you’ll receive the lump sum of money and have to pay off the student loans yourself. 

Travis Tracy, CFP and founder of Fortitude Financial Planning, agrees that refinancing is typically the best option as long as you can secure a lower interest rate. One of his clients had private student loans with a 12% interest rate through Sallie Mae. Tracy helped her reach out to a local credit union and refinance them so she could enjoy a lower monthly payment and save a lot in interest over time. 

If you’re still convinced that a personal loan is your best option, weigh the benefits and drawbacks before applying.

Pros and Cons of Using a Personal Loan To Pay Student Loans

  • New loan terms, including interest rate

  • Potentially more flexibility

  • Ability to combine federal and private loans into one

  • Loss of federal student loan protections and forgiveness

  • Potentially higher interest rate

  • May be hard to qualify

  • Loss of tax deduction for student loan interest

If you don’t like the terms of your current student loans and can land better terms such as a lower interest rate, paying back student loans with a personal loan may be a good option. A lower interest rate can lead to lower monthly payments and allow you to pay off your balance sooner. 

“In addition, if you opt for a personal loan through a credit union or community bank, for example, you may have more flexibility if you encounter a rough patch,” Leo Marte, CFP and president of Abundant Advisors, told The Balance.

However, the reality is that there are more drawbacks than advantages to using a personal loan to pay back student loans. This is particularly true if you have federal student loans, as you’ll miss out on income-based repayment plans, federal loan protections, and loan forgiveness

“Personal loans do not offer these options, so you’ll be locked into your payment until you pay them off,” Logan Murray, CFP at Pocket Project, told The Balance.  


Converting your student loan to a personal loan could wind up costing you at tax time, too. That’s because you can deduct up to $2,500 of interest you are required to pay on your qualified student loans, depending on your modified adjusted gross income.

If you have student loans with a co-signer, and your credit isn’t strong yet, you may have trouble qualifying for a personal loan on your own. And even if you do qualify with fair or poor credit, your interest rate might not be lower than your student loan interest rate. Lenders may also take other details into account, like your debt-to-income ratio. See what you prequalify for before you apply for any personal loans.

Compare Your Options

While you can use a personal loan to pay off your student loans, you’ll simply be swapping debt for debt, and you will be locked into repaying that personal loan with fewer protections if you can’t. When you’re trying to figure out how to tackle your student loans, consider all of the options at your disposal first. Don’t be afraid to reach out to your lender and find out whether it can help. It’s also wise to take a close look at your income and expenses so you can figure out a way to increase your savings and knock down student loan debt as quickly as possible.

If you haven’t refinanced your federal student loans, consider income-based repayment plans. They can help you lower your monthly payments and potentially qualify you for loan forgiveness down the road. 

Frequently Asked Questions

Will I still qualify for public service loan forgiveness if I refinance?

No. If you get a personal loan to pay off your federal student loans, you are signing a new contract with a new servicer (on their terms), and you will no longer have access to federal repayment or forgiveness options.

Is refinancing the same as consolidating?

Though both methods involve restructuring your loan to achieve better terms, the way this is done differs. Refinancing is when you swap one lender for another, whereas with loan consolidation you may be able to keep your current lender and simply merge your multiple loans with them into a single more manageable loan.

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