Can I use a federal student loan to pay off a private student loan?

by Dafna Meltzer, CPA | Aug 10, 2018
askacpaicon

Can I use a federal student loan to pay off a private student loan from a previous year?

In general, student loans are provided "to cover educational expenses." While a prior student loan presumably covered educational expenses, I don't read the regulations to allow for that, particularly if the student is no longer attending college. The available information does not seem to specifically prohibit refinancing, but it does give a list (not exhaustive) of educational expenses allowed. My understanding from that is that refinancing, particularly if a student is no longer in school, would not be allowed. 

You should check directly with the banking institution from which you are seeking a loan for a definitive answer.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Dafna Meltzer, CPA, is with Meltzer & Meltzer CPAs in Elkins Park, Pa.

Disclaimer
The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
Ask a CPA

Search the most frequently asked finance and accounting questions and read the responses from PICPA members. Always consult a CPA before taking action.

Search