Table of Contents
Student loans can be used to cover more than tuition and fees. They can pay for other necessary school-related expenses, including housing, food, commuting, a computer, and often, study abroad.
But there are some expenses student loans should not be used for. Read on to learn what student loans can cover, what they shouldn’t be used for, and alternative ways to pay for living expenses while in school.
Key Points
• Student loans can be utilized for essential expenses like tuition, room and board, transportation, books, and personal supplies, as long as the student is enrolled at least half-time.
• Nonessential expenses, such as vacations, car purchases, or entertainment, should not be covered by student loans, as these could lead to financial consequences.
• Utilizing student loan funds for nonqualified expenses may not be actively monitored, but it’s important to remember that this money must be repaid with interest.
• Alternative ways to cover living expenses include part-time jobs, work-study programs, scholarships, summer employment, and selling unwanted items for extra cash.
• Borrowers should exhaust federal student aid options before considering private loans, as they generally lack the borrower protections provided by federal loans.
Can You Take Out a Student Loan for Living Expenses?
Yes, you can take out student loans for living expenses while in school. How financial aid works is that federal and private student loans typically include funds for not only tuition and fees, but also necessities like housing, food, transportation, and personal expenses.
When applying for federal student loans, schools determine your cost of attendance (COA), which includes these expenses, and financial aid is disbursed accordingly. However, borrowing should be done wisely, as any money used for living expenses will need to be repaid with interest.
Private student loans can also cover living expenses, but eligibility and terms vary by lender. These loans often require a credit check or cosigner, and interest rates may be higher than federal options.
How to Use Student Loans for Living Expenses Off-Campus
Using student loans for living expenses off-campus requires careful budgeting and adherence to loan guidelines, especially considering how much college students spend per month. Once your school disburses the loan funds, any remaining balance after tuition and fees is typically refunded to you. Student loan funds can cover rent, utilities, groceries, and other essential costs.
However, it’s important to prioritize necessary expenses and avoid using loan money for noneducational purchases, as this debt must be repaid with interest.
Federal Student Loans vs. Private Student Loans for Housing Expenses
When it comes to student loans for housing, federal student loans are often the better option due to their flexible repayment plans and borrower protections. Federal loans do not require a credit check (except for PLUS loans), generally making them more accessible to students.
Additionally, repayment options, like income-driven repayment plans, and student loan forgiveness may help borrowers manage their financial obligations after graduation.
Private student loans may offer higher borrowing limits but typically come with stricter credit requirements and fewer repayment protections. Interest rates vary based on creditworthiness, and repayment terms are often less flexible than federal loans. While private loans can help bridge financial gaps, they should be considered after maximizing federal aid and other funding sources like scholarships and grants.
Recommended: How to Pay for College Without Federal Loans
Living Off Student Loans: Do’s and Don’ts
As long as a student is enrolled at least half-time, student loans can cover a range of expenses at a qualified institution of higher education or at a hospital or health-care facility that provides postgraduate internship and residency training programs.
Do
Student loans can typically cover the following expenses:
• Tuition and mandatory fees. The first thing student loans should be used to cover is the cost of tuition and fees, as these are necessary expenses for getting a degree.
• Room and board. Whether it’s a dorm or an apartment off-campus, the expense can be covered. Board means a campus meal plan or groceries.
• Transportation. Loan money can pay for maintaining, insuring, and fueling your car or for public transportation fares.
• Books and supplies. New, used, or rented textbooks are covered, as are supplies ranging from software to notebooks.
• A personal computer. You can buy or rent a computer with student loan money.
• Child care. Child-care expenses may be covered while working or single parents are in classes. You’ll need to ask your school to factor these expenses into the cost of attendance.
• Study-abroad costs. The website for the Federal Student Aid office has more information about the study abroad process and a search tool that can help identify international schools that participate in the federal student loan program.
• Personal expenses. These may include cell phone bills, laundry costs, bed linens, towels, a microwave oven, or a mini fridge.
Other qualified expenses may include utilities and furnishings.
Don’t
Avoid using student loans for noneducation expenses, such as:
• Nonessential travel. This includes vacations, leisure trips, and nonacademic travel expenses.
• Luxury items. Expensive electronics, designer clothing, or nonessential purchases
• Entertainment costs. This includes concerts, streaming services, dining out frequently, and nightlife.
• Car purchases. Buying a vehicle or making monthly car payments should not be done with student loan money.
• Business investments. Student loans should not be used for starting a business or making investments.
• Credit card debt. Paying off personal credit card balances is not the goal of student loans.
• Costs unrelated to education. These may include expenses such as gym memberships or those related to hobbies.
What Happens If You Misuse Student Loan Funds?
The use of student loans for nonqualified expenses could be reported to the Office of Inspector General as fraud, or a lender could call the loan balance due immediately. But in general, no one is tracking how students spend loan money.
Both federal and private student loans are disbursed to your school, which takes out tuition and fees, and if you live on campus, room and board. Any remaining money goes to you, so it would generally be difficult for lenders to tell if you’re using the remainder as intended.
If you end up with more loan money than you need, it might be tempting to go on a spending spree with your student loan refund, but remember that you will pay interest on that borrowed money.
On the other hand, if federal aid doesn’t cover college costs, private student loans might help fill gaps in need. These loans are not backed by the federal government and therefore not subject to its qualification rules. They also lack the borrower protections available to federal loans, such as an income-driven repayment and deferment. It’s a good idea to obtain a private student loan only after maxing out federal student aid. A student loan cosigner may help a student qualify.
It’s also possible to refinance student loans in the future if you think you might qualify for a lower interest rate or more favorable loan terms. With refinancing, you replace your existing news with a new loan from a private lender. Just be aware that refinancing federal loans makes them ineligible for federal benefits.
Other Ways to Cover Living Expenses
Aside from using student loans, there are several possible ways to pay for living expenses while in school. Here are some ideas.
Part-Time Job
Getting a part-time job can help students make extra money to cover costs. Looking for side hustles with flexible hours can help students more easily juggle work and class. Some students may even be able to find a job that’s related to their major or career of choice.
Recommended: Jobs That Pay for Your College Degree
Work-Study
Federal work-study may be offered as part of a student’s federal aid package and is based on financial need. Work-study programs are available to undergraduate, graduate, and professional students, regardless of whether they are a full-time or part-time student.
Becoming a Resident Assistant
A resident assistant (RA) is usually assigned to a particular floor or wing of a dormitory to oversee dorm residents. RAs might lead mandatory floor meetings, organize monthly social gatherings, and referee the occasional roommate disagreement. Not only do RAs often get a better room than others on your dorm floor, they also typically get free housing.
Scholarships
Merit scholarships are awarded to students based on their skill or ability for a certain speciality. These scholarships are typically offered through private companies, nonprofit organizations, colleges and universities, and professional and social organizations. As you’re researching scholarships that you might be eligible for, pay attention to any requirements. Some awards have certain conditions, such as requiring that the money be used only for tuition, while others allow students to use the funds for whatever they want.
Tuition bills are due.
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student loan.
Summer Job
As an alternative (or addition) to a part-time job, you might want to consider a summer job or paid internship. During the summer, students may have more free time to work more hours and rack up cash to help cover their housing and living expenses for the following year.
Selling Unwanted Items
Cleaning out your closet? Selling castoffs on buy-and-sell apps and websites can be another potential way to earn money.
The Takeaway
Student loans can be used to cover housing, food, transportation, supplies, and other college essentials. Funds shouldn’t be used for noneducation expenses, like vacations, new clothes, pricey meals, or other debt.
Generally speaking, no one tracks how loan money is spent, but remember, it is borrowed money that will have to be repaid, with interest. A part-time job, work-study program, and scholarships are other ways to earn extra money for expenses.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
FAQ
Which living expenses are most often paid for with student loans?
Student loans commonly cover essential living expenses such as housing (rent or dorm fees), utilities, groceries, transportation, and personal expenses. They may also help pay for school-related costs like books, supplies, and technology. Federal and private loans can be used for these necessities but should be borrowed responsibly.
Do you have to tell the lender if you change housing?
Yes, you should inform your lender if you change housing, especially if it affects your residency status or financial situation. Keeping your contact information updated ensures you receive important loan-related communications, including billing statements and repayment details, helping you avoid missed payments or potential issues with your loan.
Can you take out more funds if your living expenses increase?
If your living expenses increase, you may be able to request additional student loan funds by appealing to your school’s financial aid office. They may adjust your cost of attendance, allowing you to borrow more. However, federal and private loan limits apply, so additional funding isn’t always guaranteed.
Can you use student loan money on monthly car payments?
No. Student loans are meant for education-related expenses, including tuition, housing, and supplies. While transportation costs like gas or public transit may be covered, using student loan money for monthly car payments is generally not allowed.
Can you use student loans to pay for a gym membership?
Student loans should not be used to cover noneducation expenses such as membership to a gym. Many schools have a gym or fitness center on campus that’s available to students and included in the cost of tuition.
What should you do with leftover student loan money?
It’s a good idea to return excess student loan money to the lender because it will lower the total cost of the loan. However, you could also use the funds to pay for qualified educational expenses, like tuition, housing, child care, or transportation.
Can you use a student loan to pay a tuition bill that is past due?
In some cases, you may be able to use a student loan to pay a past-due tuition bill, but it depends on the lender and school policies. Federal and private loans typically apply to current or future expenses. Some schools may offer emergency loans or payment plans for overdue tuition balances.
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