How to Use Student Loans for Non-Tuition Expenses

When researching different colleges and universities, you’ll see a different estimated total cost of attendance, or COA, for each school. This is a useful starting point for planning your college costs but is only an estimate.

Aside from paying the base college tuition each year, students need to pay for other tangential expenses while actively enrolled in school. For example, the cost of college increases a great deal when you factor in indirect costs such as supplies, transportation, and other miscellaneous personal expenses.

Students who have an excess in student loan funds might choose to use a portion of their student loans to cover other essential educational and living expenses. Here’s what you should know before using student loans for rent and other expenses.

Non-tuition college expenses to expect

Each higher education institution calculates its cost of attendance, or COA, which is a reasonable estimate for how much a student will need to pay to go to school there. COA minus any scholarships will generally be the maximum federal aid.

Talk to the school’s financial aid office to let them know of circumstances like any dependents you need to care for during college, so they can factor that into your award. The good thing is that a few general guidelines are in place for any borrower.

Here’s a reminder of all of the living expenses you might encounter during college:

• Housing (dorm, off-campus apartment, your family home)
• Furnishings, dishes, linens and other housing supplies
• Housing utilities
• Groceries
• Child care or dependent care costs
• Personal computer or laptop, printer, or internet service
• Lab fees
• Fees associated with exams, licensing and certifications
• Transportation (bike, bus pass, fuel for your car)
• Personal assistance or services
• Health care

Approved and non-approved uses of student loan funds

The Department of Education generally stipulates which expenses student loans can fund. A college’s COA includes a few basics, which are approved uses for your student loans:

• Tuition and fees
• Room and board
• Required textbooks and supplies
• Transportation (bus pass, vehicle fuel, bike)
• Miscellaneous expenses (laptop, internet fees, etc.)
• Child care costs
• Personal assistance or special services (for those with a disability)

Some expenses you might incur during the school year aren’t considered necessary by the Department of Education. Technically, borrowers shouldn’t use their disbursement of federal loans for expenditures such as:

• Vacation or unnecessary travel
• Excessive meal expenses
• Investing
• A down payment on a house
• Entertainment (Netflix subscription, tickets to attractions, etc.)
• Shopping
• Paying off other debt

As a college student, you have the option of using student loans for approved living expenses. However, the total cost of what’s “necessary” to successfully navigate through four or more years of higher education can vary quite a bit.

Related: Can You Use Student Loans for a Car Purchase?

There’s some room for interpretation about what you can spend financial aid money on as a college student. For instance, you obviously need a place to live. But this might mean living at home, living on campus, or living off-campus away from your family home. And within those options, there are a range of costs.

Pros and cons of using student loans for living expenses

There are good reasons to use your student loans to pay your living costs while in school.

Pros

Free up time and energy to focus on your studies.

You can look at spending loan funds on various living expenses as a way of working excessively as a student. Being successful in your degree program can help pave the way to a better-paying career after college, and many students find that a full-time course load takes the bulk of their time and energy.

Ease challenges to completing your degree

If you have a dependent child, for example, student loans can be used to help pay for childcare during classes or study times. Perhaps there are reasons you need to live away from campus, thus increasing your transportation expenses. A student shouldn’t have to choose between paying essential bills and completing their degree.

Cons

More money borrowed = more to repay

If you go wild using student loans to fund trips to Jamaica or buy a brand-new car, you risk over-inflating your student loan debt. That balance will have to be repaid eventually, and even if you refinance your student loans or have some forgiven, it’s a major burden.

Student debt affects other life decisions

It’s hard to think ahead to life after graduation, but minimizing your costs while in school will pay dividends later. The higher your student loan balance, the more pressure you’ll face to score a high-paying job right away to make minimum payments.

Keeping your loans minimal means more freedom to take the job you want, to relocate where you want, and to consider your dreams, not just your budget. Major life goals might be delayed by years if you saddle yourself with cumbersome debt.

If your loan payments are low, just think of how much more freedom you’ll give the “future you”. You can live more comfortably, save more for retirement and take greater risks in your career.

Potential problems with how you spend student loans

FAFSA doesn’t police how students spend their extra financial aid, after tuition and fees are covered. No one’s going to audit you to find out whether you spent more on transportation because of that spring break trip to the beach. It’s likely you won’t get in “official” trouble for overspending on some of these grey-area expenses during college.

However, following the loan terms is important, so think about whether an expense is a necessity or a luxury. Whether you borrow from a federal loan or from a private lender, adhere as closely as possible to your lender’s expectations of allowed student loan use. Practicing responsible use of loan funds will help you get started on the right financial track early in your post-college career.

Alternatives to financing living expenses through student loans

Student loans can make college costs more accessible. As a student, use financial aid to make your journey smoother by considering other options, like scholarships, instead of using student loans for living expenses. Some examples include:

• Work a part-time job. Side employment can help make up the difference and minimize total student loan debt.
• Live like a broke college student. Don’t use your maximum financial aid award to finance a cushy lifestyle; instead, keep your spending reasonable.
• Avoid high-risk spending. For example, don’t use your loans on things like the stock market or cryptocurrency investing.

Technically, you can live off student loans to cover much more than tuition costs while in school. However, when you’re literally living on borrowed funds, it’s important to proceed with care.

Just because you receive a FAFSA award for a certain amount in student loans, that doesn’t mean you have to accept the full amount.

You can accept a lower student loan amount, and if getting through the entire semester gets tough financially, you can always request more. A student can also cancel a student loan in part or in full within 120 days of receiving it, thus accruing no interest or fees.

Also, keep an eye on your bank account and your budget throughout college. You’ll need to consider categories that range in cost. For example, one student might spend twice as much on groceries per month as another student. Or you might have the option of a pricey off-campus apartment instead of more affordable housing.

Spending part of your student loans on purchases that aren’t necessary for school is a trade-off. The more you borrow, the more you need to pay back (and student loan forgiveness doesn’t always work out as planned). Plus, a higher loan balance means larger interest accruals and a higher overall cost of education.

In general, keep your expenses and your student loan totals as low as possible. Most people don’t look back and wish they’d borrowed more in student loans, after all. Just keep in mind, the more you borrow today limits your freedom and choices a few years from now.

FAQs about appropriate uses of student loans

Using student loans for living expenses

College is expensive, so anything you can do to lower your costs is beneficial. Just remember that student loans aren’t as easy of a solution as they might seem. Working part-time to pay more of the bills and living on a tight budget are good alternatives to extra student loan debt.