Should You Take Out a Personal Loan to Pay for College Expenses?

Finance & Money Articles

If your child won a scholarship for tuition at a university, you may think your dreams have come true. But the truth is, tuition fees are only part of the expense of a college education. Mandatory fees, books and supplies, and room and board often equal or exceed the cost of tuition. According to CollegeData, the average cost of attendance at a public college 2015–2016 was $24,061. Of that amount, books and supplies accounted for nearly $1,300, personal supplies and transportation expenses totaled $2,661, and room and board averaged $10,138. That means that even if your child's scholarship covers the tuition, you will likely be responsible for nearly $15,000 per year in additional costs. Many parents turn to a personal loan to pay for some or all of their child's extra education expenses. Find out if a personal loan is the best choice for you.

Who Is Getting a Loan?

One of the first questions you need to answer is who will be responsible for the loan. If you intend to cover your child's expenses and are willing to take on the responsibility for the debt, then you can apply for a personal loan. If, on the other hand, you expect your child to pay for their own education, they will likely need you to co-sign if they apply for a personal loan. They can, however, apply for student loans without a co-signer.

What About Student Loans?

Your child's eligibility for a student loan depends on your family income. If your income is low enough for them to qualify, student loans will be part of the financial-aid award he receives from the school. This does not require you to co-sign for your child. The loan will be in your child's name, and they will be responsible for repaying the loan. 

Pros and Cons

There are several pros and cons for both personal and student loans. Which works best for your family depends on a variety of factors, including the amount of money needed, your financial status, and interest rates. Consider these pros and cons of both personal and student loans before you or your child make a final decision.

Student Loans


  • Long repayment period.
  • Repayment begins after graduation.
  • Can enter an income-contingent repayment plan or receive a deferment or forbearance. This means if your child is unemployed or unable to work, they may qualify for a deferment or reduce the amount of their payments until their situation improves.
  • Not contingent on credit history and requires no co-signer. Your child will qualify regardless of their or your credit history.
  • Does not require proof of employment.


  • Can become a financial burden for many years.
  • Cannot be discharged in bankruptcy.
  • Failure to repay the loan on time can result in sanctions, such as inability to get college transcripts or renew professional licenses.
  • The amount of the combined loans may be larger than your child anticipated, as the loans are processed per semester. This requires keeping track of the total amount borrowed.
  • Interest may continue to accrue when your child receives a deferment or forbearance due to financial hardships. This will make the total amount they owe higher when they pay off the loan.

Personal Loans


  • May have lower interest rates, depending on the lender and your credit rating.
  • Short repayment period. This allows you to pay the loan off before your need to take out another one.
  • Ideal for small amounts.
  • Can be discharged in bankruptcy if you face a financial crisis.


  • Repayment is not delayed until after graduation.
  • There is no income-contingency clause. If you lose your job or become unable to work, you are still responsible for making the loan payments.
  • Interest rates may be higher on a personal loan depending on the lender and your credit rating.

If you have a good credit rating and can afford to take out a personal loan to cover a portion of your child's educational costs, a personal loan may serve you well. However, if you are struggling financially, have a poor credit rating, or need a sizable loan to fund the remainder of your child's educational expenses, a student loan may be a reasonable option for your child. Discuss the options as a family, pointing out the pros and cons of each option. Talk to lenders such as Union State Bank about your loan options for more personalized information. 


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