Sometimes, it's easy to feel like you'll never pay off your entire student loan debt balance. In fact, respondents to a One Wisconsin Institute survey said on average, it took them 21 years to pay off their student loan debt. So it can be pretty tempting to look for creative ways to pay down your debt a little quicker.
Personal loans can generally be used on any large expense (like a wedding, a home renovation or an emergency expense), but for many people, they are an instrumental way to consolidate debt or pay down high-interest debt a little faster.
On average, personal loans have a lower interest rate compared to credit cards — according to the Federal Reserve, the current average APR for a two-year personal loan is 9.58% while the average APR for a credit card is 16.30%.
Of course, the interest rate on a personal loan will depend on your credit score. And, generally, the higher your credit score, the more likely you are to receive a lower interest rate among other more favorable terms for a personal loan. Some lenders, like LightStream, actually offer interest rates as low as 6.99% - 25.49% APR with AutoPay.
LightStream Personal Loans
Annual Percentage Rate (APR)
6.49% - 24.89%* APR with AutoPay
Loan purpose
Debt consolidation, home improvement, auto financing, medical expenses, and others
Loan amounts
$5,000 to $100,000
Terms
24 to 144 months* dependent on loan purpose
Credit needed
Good
Origination fee
None
Early payoff penalty
None
Late fee
None
Terms apply. *AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Excellent credit required for lowest rate. Rates vary by loan purpose.
By contrast, interest rates on federal student loans will depend on the type of loan (undergraduate, graduate or parent PLUS loan), but the average rate across the board is 5.8%. And when it comes to private student loans, average interest rates can range from 6% to 7% but can be as high as 12.99% among major private lenders. So the idea of using a lower-interest personal loan to pay off a student loan can seem like a chance to save on interest.
So can you use a personal loan to pay off student loan debt? It depends. Here's what you should consider before trying this strategy.
Terms of use for the personal loan
Every lender has its own set of terms when it comes to how the funds from a personal loan can be used. For example, while some lenders will allow you to use a personal loan toward small business expenses, others will not, and you'll have to apply for a small business loan instead.
Many lenders actually have terms that prohibit the use of a personal loan for paying off student loan debt. If you aren't sure if a particular lender will allow you to use the funds for this purpose, you should be up front about your intentions to avoid breaching the lender's terms of use. If you use the money for a prohibited purpose, you could be held responsible for paying back the full amount immediately.
Interest rates on student loans vs. personal loans
Interest rates for personal loans can sometimes be lower than interest rates on private student loans (depending on the lender and your credit score, of course), but not always. The only time you'll actually save money by using a personal loan to pay off your student loans is if you're definitely receiving a lower interest rate on the loan.
Some lenders have tools you can use to estimate what loans you qualify for and what your interest rate is likely to be. Prosper Personal Loan, for example, has a rate tool that can show you how much you'll qualify for, what your monthly payments will look like and how much you'll pay in interest, all without hurting your credit score. This can help you get a preview of what's to come if you do decide to submit an application.
Prosper Personal Loans
Annual Percentage Rate (APR)
8.99% to 35.99%
Loan purpose
Debt consolidation/refinancing, home improvement, auto/motor, medical or dental, big purchase and more
Loan amounts
$2,000 to $50,000
Terms
24, 36, 48, and 60 months
Credit needed
640+
Origination fee
1%-9.99%, deducted from loan proceeds
Early payoff penalty
None
Late fee
5% of monthly payment amount or $15, whichever is greater (with 15-day grace period)
Terms apply.
Federal student loan protections
In 2020, all federal student loan payments went into a forbearance period as a result of the Covid-19 pandemic. This forbearance period was previously extended through Jan. 31, 2022. Most recently, it has been extended through Aug. 31, 2022. This means that federal student loan borrowers are not required to make student loan payments at this time, and their balances will not accrue interest until after the pause ends next month. If you have private student loans, or you refinanced your federal student loans, however, you don't qualify for this protection.
If you take out a personal loan with the intention of using the money to pay off your federal student loan balance, you will lose all the protections that come with federal loans. That means you won't be able to qualify for any federal loan repayment programs, like an income-driven repayment plan, grace periods for repayment and public service loan forgiveness (PSLF), and you'll lose access to the current forbearance period as well.
These initiatives are designed to make it easier to repay your balance as a federal student loan borrower, but they'll no longer be available to you once you take on a private personal loan to pay off the balance. This can present a financially strenuous situation if you really end up needing some economic relief from making payments.
Bankruptcy protections
Bankruptcy is a process where a person can seek relief from some or all of their debts if they are unable to repay them. Chapter 7 bankruptcy can completely eliminate any debts you have. And while it can damage your credit score, filing for bankruptcy provides something of a financial reset — by improving your financial habits, you can work to rebuild your credit score over time.
But most student loans aren't discharged when you file for bankruptcy. According to the American Bar Association, both private and federal student loans are unable to be discharged in bankruptcy unless a borrower can prove that the loan payment is an "undue hardship." However, it is notoriously difficult to prove the standards for undue hardship (here's more on what you need to know about filing bankruptcy on student loans).
Personal loans, though, can be discharged in bankruptcy. This is arguably one of the few advantages to paying off a student loan using a personal loan.
Other options
Refinancing is a popular option for student loan borrowers because they can usually land a lower interest rate and might even end up with lower monthly payments, too. The terms around refinancing a student loan also aren't as restricting as they are when it comes to using a personal loan to pay off student loan debt. Just keep in mind that when refinancing, you'll typically lose federal protections on your student loans. But it can be a smart move for anyone with private student loans.
There are also many options available when it comes to finding a lender that will refinance your student loans. SoFi has variable and fixed-rate refinancing options and offers a discount if make your monthly payments using autopay.
- 0.25% autopay interest rate discount
- 0.125% SoFi Plus discount
- No origination fees, no late fees and no insufficient fund fees
- Private loans, which means you lose federal loan benefits
- $5,000 minimum loan amount
Fixed rates range from 3.99% APR to 9.99% APR with 0.25% autopay discount and 0.125% SoFi Plus discount. Variable rates range from 5.74% APR to 9.99% APR with 0.25% autopay discount and 0.125% SoFi Plus discount. Unless required to be lower to comply with applicable law, Variable Interest rates will never exceed 13.95% (the maximum rate for these loans). SoFi rate ranges are current as of 5/6/26 and are subject to change at any time. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. You may pay more interest over the life of the loan if you refinance with an extended term. Autopay Discount: The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly payments as outlined in your loan agreement by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. When the autopay interest rate deduction is added or removed, the next time the loan is re-amortized (quarterly for fixed rate loans; monthly for variable rate loans),the principal balance of your loan will be spread over the remaining loan term, and your monthly payment amount will change. This benefit is suspended during periods of deferment, grace period, or forbearance. Autopay is not required to receive a loan from SoFi. Member Rate Discount: To be eligible for an additional 0.125% interest rate reduction on a Student Loan Refinancing, you must, within 31 days of loan funding, either (1) be a SoFi Plus subscriber, (2) receive an Eligible Direct Deposit into a SoFi Checking or Savings account, or (3) receive at least $5,000 in Qualifying Deposits into a SoFi Checking or Savings account. You must continue to meet at least one of the above eligibility criteria every 31 days to maintain the discount. See the SoFi Plus terms for details on SoFi Plus subscription. For more details on Eligible Direct Deposit or Qualifying Deposits, please see https://www.sofi.com/legal/banking-rate-sheet. Once you become eligible during the initial period, the discount will be removed or reinstated depending on whether the criteria have been met. Each time your loan is re-amortized, your monthly payment amount will change based upon the interest rate that was in place. SoFi reserves the right to modify or terminate this offer at any time for unenrolled participants. You are not required to meet these criteria to be approved for a loan. SoFi Plus Discount: To be eligible to receive an additional (0.125%) interest rate reduction on your Student Loan Refinancing (your "Loan") for enrolling in SoFi Plus, you must enroll in SoFi Plus within 30 days of Loan funding, either by receiving an Eligible Direct Deposit to your SoFi Checking and Savings account, or by paying the SoFi Plus Subscription Fee. Once eligible, you will receive this discount during periods in which you have received Eligible Direct Deposit to your SoFi Checking and Savings Account, or during periods in which SoFi successfully receives payment of the SoFi Plus Subscription Fee. This discount lowers your interest rate but does not change the amount of your regular monthly payment. This discount will be removed during periods in which SoFi determines you have turned off Eligible Direct Deposit to your Checking and Savings account or in which you have not paid the SoFi Plus Subscription Fee. SoFi reserves the right to change or terminate this interest rate reduction offer for unenrolled participants at any time without notice. You are not required to enroll in Eligible Direct Deposit or to pay the SoFi Plus Subscription Fee to be eligible for Loan approval. See what qualifies as an Eligible Direct Deposit here: www.sofi.com/terms-of-use/#slr-discount
Eligible Direct Deposit means regularly recurring deposit of regular income to an Automated Clearing House ("ACH") Network during a 30-Day Evaluation Period (as defined below). Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not generate payments that are detectable by our system. So qualifying direct deposits are those where the student loan refinance discount rate is applied automatically for each month where you have an Eligible Direct Deposit of at least $1,000 per 30-day Evaluation Period. Eligible Direct Deposit does not include transfers between accounts you own, refunds, rebates, reimbursements, stimulus payments, merchant refunds, or payments from person-to-person payment services (such as Venmo). To qualify for the 0.25% interest rate reduction, the direct deposit must be recurring and paid directly into a SoFi Checking or Savings account. For the avoidance of doubt, deposits made via check, cash, or mobile check deposit are not eligible. Direct Deposit eligibility is determined by SoFi's sole discretion. The 30-Day Evaluation Period refers to the period starting on the "Start Date" and ending on the "End Date" set forth on the App Details page of your account, which comprises a period of 30 calendar days (the "30-Day Evaluation Period"). You can access the APV Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking → Checking → APV or (ii) Banking → Checking → APV Details. If you do not qualify for the discount during the initial 30-Day Evaluation Period, your loan will not be eligible for a discount unless you re-qualify in a later 30-Day Evaluation Period. If you qualify during the 30-Day Evaluation Period, the discount will be applied on a going-forward basis only. SoFi Bank determines eligibility. If you have a joint account, each account holder receives Eligible Direct Deposits into your SoFi Checking and Savings account, then you will be eligible for all SoFi Plus benefits, including on accounts you hold in your own name. Federal Loan Disclosure: Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELiIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligiblity. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).
If you worry you'll have trouble making on-time loan payments, you should contact your student loan servicer to discuss the possibility of extending forbearance on an individual basis. Oftentimes, you can ask for a payment plan that better suits your circumstances.
Bottom line
Paying off your student loans is a huge accomplishment, but it can be one that is often difficult to reach. Many people are left making student loan payments well into adulthood. And while using a lower-interest personal loan to pay off your student loans can be a clever way to save money, it's a strategy that should be very carefully considered — especially when it comes to understanding the terms of use of the loan.
However, there are other avenues for anyone seeking a little more financial flexibility when it comes to your student loan payments. Refinancing is a popular way to save money on payments by getting a lower interest rate. But if you feel you will be unable to meet the required minimum payments on your student loan balance, contact your loan servicer ASAP to discuss additional options.
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*Your LightStream loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Excellent credit is required to qualify for lowest rates. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice. Payment example: Monthly payments for a $10,000 loan at 7.99% APR with a term of 3 years would result in 36 monthly payments of $313.32.
Fixed rates range from 3.99% APR to 9.99% APR with 0.25% autopay discount and 0.125% SoFi Plus discount. Variable rates range from 5.74% APR to 9.99% APR with 0.25% autopay discount and 0.125% SoFi Plus discount. Unless required to be lower to comply with applicable law, Variable Interest rates will never exceed 13.95% (the maximum rate for these loans). SoFi rate ranges are current as of 5/6/26 and are subject to change at any time. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. You may pay more interest over the life of the loan if you refinance with an extended term.
