How to use student loans for living expenses

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Whether you’re living at home, at an off-campus apartment or in a dorm, you may need some extra cash to cover living expenses while attending school. Most people turn to student loans because of the high costs of college tuition, but that’s not the only thing loans can help with. In addition to tuition, fees and textbooks, many student loans cover the cost of room and board for on-campus and off-campus students. Here’s the breakdown of how to use student loans for living expenses.

What can your student loans be used for?

Student loans cover the vast majority of costs related to attending college, including:

  • Tuition and fees: Many lenders base your loan amount on the cost of attendance at your college.
  • Room and board: This includes on-campus housing as well as off-campus living.
  • Books, supplies and equipment: Loans cover books and other classroom needs, including school supplies. Equipment may also include things like a computer, tablet, calculator and more.
  • Transportation expenses: Think of costs like gas, bus and train fare, parking fees, car insurance and more.
  • Housing utilities and supplies: Student loans can pay for the water and lights in your off-campus apartment. Some supplies and furnishings are OK, too.
  • Meals and groceries: If you live on campus, your meals might be covered through an on-campus meal plan. But your loans can cover groceries or food when you aren’t eating in the school cafeteria.

What your student loans should not be used for

Many purchases may fall under the umbrella of “school-related items,” but that doesn’t mean they’re the best investment. There are some things you should avoid splurging on using your student loans, including:

  • A new car or vehicle: While student loans can cover some car and transportation expenses, buying a brand-new car isn’t one of them. You’ll need to pay out of pocket for a new car, scooter or other type of vehicle.
  • Unrelated electronics: Computers and tablets can be used for your schoolwork; a jumbo TV cannot. Avoid upgrading your entertainment center at the expense of your education.
  • Down payment assistance: Rent and home payments might be covered, but you’ll need to find an alternative method for a down payment, closing costs and other homebuying needs.
  • Vacations and travel: If you want to get away, you’ll need to pay out of pocket or find a study abroad program to offset traveling costs.
  • Business expenses: Your side-hustle costs are your own responsibility and won’t be covered by student loans.
  • Paying other debt: If you have a big car loan, medical bill or other loans to pay off, your student loans won’t pay for them.
  • Someone else’s education: Your student loans can’t fund a friend’s college education.

What can happen if you use your money for nonessentials?

While your student aid office and lender aren’t regulating every line item of where you spend your loans, you may face consequences if they discover that you’ve been misusing your student loan funds. Both federal and private student loans can take action if they find out you’ve used your loans for unnecessary purchases. They may end your current loans, deny you future loans or request that your balance be paid in full.

If you’re required to pay back your loan balance, remember that you owe the principal plus interest.

Tips for how to best use your student loans

The money you receive in student loans is based on your school’s cost of attendance, which varies based on where you go to college. While there are a few rules about how you can use this money, the most important thing is to be smart about how you’re spending your student loan funds. If you want to make sure you’re spending wisely, start with these guidelines:

  • Cover your must-have needs first: Your tuition, fees and major expenses, including living arrangements, should get the bulk of your money.
  • Look for less expensive alternatives: Even if you need to buy something for school, you’re not obligated to always buy the most expensive option. When it comes to supplies, see if you can buy a less expensive or older version, look for something secondhand, investigate renting and borrowing options or split the cost with a friend.
  • Spend only what you need: Even if you were approved for a large loan amount, you’re not required to spend it all. Use what you need.
  • Remember that you still owe money: A loan is meant to cover immediate needs. But there will come a time you need to pay it back with interest. Carefully consider where your money goes; the more you spend, the higher your monthly payments will be.

Alternative options for using loans for living expenses

Student loans are a popular way to fund education-related expenses, but they’re not the only option. Before settling for loans, exhaust other avenues — especially those that give you free money. These may include:

  • Grants: Grants are offered by the government, colleges and private companies. They are disbursed based on financial need, and they do not need to be repaid.
  • Scholarships: Scholarships are similar to grants, but they are often merit-based. Some also award money if you belong to niche organizations or have unusual interests.
  • Part-time work: If you can, find a summer job or part-time employment while you’re in school to help offset the costs of education. Some colleges offer work-study programs or advertise job opportunities that are more flexible with class schedules.

The bottom line

Student loans are available to cover a wide range of college costs, including on-campus and off-campus housing. While you can use student loans for living expenses, be smart about how you spend your money. Your loans can cover a lot of things, but not everything. Don’t spend more than you need, and always remember that you’ll have to pay back anything you borrow.

Featured image by Dragon Images of Shutterstock.

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