A personal student loan is a private loan used to cover education expenses when federal aid falls short. These loans require credit checks and come from banks, credit unions, or online lenders.
Unlike federal student loans, personal student loans are issued by private lenders. You borrow a set amount, repay it with interest over time, and may need a cosigner if your credit history is limited. Interest rates are typically higher than federal loans and depend on your credit score.
Personal student loans fall into two categories:
| Type | Description | Example Lenders |
|---|---|---|
| Undergraduate Loans | For students pursuing bachelor's degrees | Sallie Mae, Discover |
| Graduate Loans | For master's, doctoral, or professional programs | SoFi, Earnest |
Some lenders offer specialized loans for career training, certifications, or bar exam prep.
Personal student loans fill gaps when federal aid, scholarships, and grants aren't enough. They're often used for tuition, books, housing, or other education-related expenses. However, they should be a last resort due to higher interest rates and fewer repayment protections than federal loans.
According to the National Center for Education Statistics, about 12% of undergraduate students take out private loans each year. The average borrower takes out $18,937 in private loans over their college career.
Many students confuse personal student loans with federal loans. Federal loans are issued by the government, have lower fixed interest rates, and offer income-driven repayment plans and loan forgiveness options. Personal student loans lack these benefits and require credit approval.
I helped my cousin compare personal student loan options last year. We used a loan comparison tool to evaluate interest rates and repayment terms from five different lenders. The process took about two hours, and he saved $2,300 over the life of his loan by choosing the best option.
Before applying, explore all financial aid options. Complete the Free Application for Federal Student Aid (FAFSA) to qualify for federal loans, grants, and work-study programs. Apply for scholarships and consider part-time work to reduce borrowing needs.
If you decide a personal student loan is necessary, borrow only what you need and understand the repayment terms. Use a student loan calculator to estimate monthly payments and total interest costs over the life of the loan.