What can private student loans be spent on?

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When you take out a private student loan, it could be tempting to spend the cash on whatever you want. But it’s important to remember that the money isn’t a windfall — and your lender isn’t writing you a blank check.

You can usually borrow up to the cost of attendance, minus other financial aid, and the lender will set rules on how you can spend the money you borrow. Generally, you can use private student loans for education costs and living expenses. Here’s a look at what falls into those categories and what you should spend your private student loans on.

What you should spend your private student loans on

Every private lender has its own rules about how you can use loan funds, so check your loan documents or contact your lender for details. Borrowers can typically use private student loans to pay for educational and living expenses, which may include:

  • College tuition: Private student loans are usually used to pay for tuition, which is the basic cost of enrolling in classes. This is typically your largest education-related expense.
  • Fees: Your school might charge academic fees associated with your degree program or institutional fees that cover things like parking at the school and using campus facilities. Your loans can cover these costs.
  • Room and board: Private student loans can pay for living expenses and meals while you’re enrolled in school. These may include on-campus housing, like a dorm room and meal plan, or off-campus housing expenses like an apartment, utilities and weekly groceries.
  • Books and supplies: Student loans also cover things you need for class, including textbooks and supplies like pens, notebooks and backpacks.
  • Transportation: While you can use private loans to pay for the costs of getting to class — like gasoline, parking passes, bus passes and highway tolls — you can’t buy a car with your loan funds.
  • Equipment: If you need equipment to participate in your classes, like a laptop, software program or camera, you can use your loans to cover the costs.
  • Dependent care expenses: You may be able to use private student loans to pay for child care or adult care while you attend classes.

What you should not spend your private loans on

When you take out a private student loan, you’ll typically sign a loan agreement that includes  language about what you can and can’t spend your private loans on. Pay attention to this information, because you could face serious consequences if your lender finds out that you misused the student loan. For instance, the lender might terminate your current loan, ask you to repay the loan balance immediately and block you from borrowing in the future.

You won’t have to send receipts to your lender or otherwise show how you used your private student loan funds. But even if you get away with using the loan for splurges, it’s not a good idea, because you’ll eventually have to make monthly payments. And those fancy dinners, trips and brand-new cellphones will cost more when you repay the loan, thanks to compounding interest.

The following is a list of things you might be allowed to purchase with a private student loan, depending on your lender and contract, but that you generally shouldn’t spend your loan money on:

  • Entertainment: Your loan funds weren’t meant to pay for things like concert tickets, streaming services and movie passes.
  • Nonessentials: A few examples include high-end clothing, gym memberships and a new TV.
  • Travel: You shouldn’t use private student loans to pay for vacations, like a spring break trip, but you might be able to use the money to pay for an accredited study abroad program. Contact the lender and ask for details.
  • Dining out: You can use your private student loans to pay for meal plans or weekly groceries, but it’s not a good idea to regularly use the money on restaurants or takeout food.
  • Other debts: Don’t use your private student loan to pay off other balances like credit cards and auto loans.
  • Emergency funds: Generally, it’s a good idea to keep three to six months’ worth of expenses in savings. But your private student loans are meant to cover educational and living expenses, not your emergency fund.

How to manage your private student loan spending

With private student loans, the goal is to borrow as little as possible, since every dollar you take out will be assessed interest charges. Here are some ways you can keep your spending in check and shrink your postgraduation loan payments:

  • Create a budget. Knowing how you’ll use your loan funds can help you borrow only what you need and minimize interest costs. Your school should tell you how much tuition, fees and textbooks cost, and you can make a list of your expected living expenses. These might include housing costs, transportation, food, a cellphone plan and personal necessities. Then figure out how much you need to borrow after you account for scholarships, grants, savings and money from a part-time job, if applicable.
  • Find ways to cut back. Once you create a budget, look for ways to save money. For instance, you might decide to ride your bike instead of drive to class, work out at the school gym, use your student ID card to get discounts and find free entertainment on campus. Renting or buying used textbooks is another way to save.
  • Separate the funds. Keeping the loan money in its own account can help you ensure that the funds are used only as intended. If the money is mixed into your regular bank account, it’s easier to spend it on nonessentials.
  • Find ways to use leftover funds. If you have money left over after paying for education and living expenses, ask the lender if you can return the remaining funds or cancel part of the loan. If this option isn’t available or you’ve missed the deadline, then use the money to make a payment on your student loan balance. You can also hang on to the money and use it for expenses during the next school term.
  • Get a part-time job. Rather than borrowing money to cover all of your costs while in school, consider finding a part-time job or starting a side hustle. You might earn enough to cover all of your living expenses and save your student loans for things like tuition, fees and textbooks.
  • Save money for school. If school is still a few months or years away, consider setting aside money now to cover some of your expenses later. This could be a good option if you want to reduce the amount you borrow but you can’t work while enrolled in class.
  • Limit the amount you borrow. Based on your degree program, research how much you might earn after graduation. Then use this information to predict how much you can afford to borrow, based on your monthly student loan payments. An online student loan calculator can help you estimate this cost.

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Written by
Kim Porter
Contributing writer
Kim Porter is a personal finance expert who loves talking budgets, credit cards and student loans. In addition to serving as a contributing writer for Bankrate, Porter also writes for publications such as U.S. News & World Report, Credit Karma and Reviewed.com. When she's not writing or reading, you can usually find her planning a trip or training for her next race.
Edited by
Student loans editor