I've grown interest in the personal loan market in the past few weeks, and I noticed that a lot of lenders do not lend to applicants whose purpose is to finance the tuition for post-secondary education.

My question is, what if the applicant is paying all of the tuition by him/herself, by doing so s/he may have less than needed for living expenses, hence s/he needs to apply for a loan.

In other words, the loan is NOT for tuition (not a penny), but for the financial deficit caused by paying tuition out of one's own pockets. Does that justify the purpose?


Thank you all for your quick answers, but it seems that your answers are based on the fact that this person is currently unemployed and may potentially not be making a decent salary. With that being said, how would you look at this case differently if this applicant is:

  • Having a full-time job making 70k or above

  • Pursuing a a Master's degree, MBA, or PhD, etc.

Thank you!

2 Answers 2


Does that justify the purpose?

That is for individual Banks to decide. No bank would pay for daily expenditure if you are saying primary salary you are spending on eduction. So your declaration is right. You are looking at funding your eduction via loan and you are earning enough for living and paying of the loan.

I noticed that a lot of lenders do not lend to applicants whose purpose is to finance the tuition for post-secondary education

This could be because the lenders have seen larger percentage defaults when people opt for such loans. It could be due to mix of factors like the the drag this would cause to an individual who may not benefit enough in terms of higher salary to repay the loan, or moves out of country getting a better job.

If it is education loan, have you looked at getting scholarships or student loans.

  • 4
    Note that the key difference between an actual 'student loan' vs a personal loan used to pay for expenses while in school, is that a student loan is often (a) backed by the government; and (b) not dischargeable through bankruptcy. These two factors reduce the risk to a bank for a student loan, and without this risk reduction, lending for these purposes may not be profitable on average. Dec 8, 2016 at 14:09

I would imagine that it goes beyond purpose and also addresses the demographic as a poor credit risk.

Those seeking a post secondary education are a poor credit risk. They are at the beginning of their careers so tend to have low income, a short credit history, and a very short time of managing money on their own. Also many don't know how to work. This later fact, to me, is a great predictor of financial success.

Reading into the financial data surrounding student loans, it pretty easy to see that this demographic makes poor money decisions. I live near a state university. A large percentage of students drive late model luxury cars, frequent expensive bars and restaurants, and wear pretty nice clothes. They also graduate with, on average 60K in student loans. Keep in mind a 4 year degree could be had for about 30K and could be paid for working a part time job.

And that, to me, is the wisdom in bank's decision. Sure they will loan you all the money you want with a government guarantee. However, once that disappears they will not you money for unnecessary purposes.

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