Can You Use Student Loans for Anything?
Posted by Frank Gogol in Loans | Updated on May 30, 2023
Student loans represent a great way to pay for college-related expenses. According to a 2015 National Student Financial Wellness Study conducted by the Ohio State University, around 70% of college students worry about money. So, the youths are struggling to make ends meet.
Now, we all know that student loans are mainly needed to afford housing or tuition, but can you use student loans for anything else? This is a question many students are asking, especially when they want to make sure they do not borrow too much money and end up having a hard time paying it off.
Let’s see whether student loans are suitable for other expenses or not.
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Can Student Loans Be Used for Anything?
Unfortunately, student loans cannot be used for just anything. The money from your loan should go towards education expenses according to the Office of Federal Student Aid from the Department of Education. As long as an expense is considered eligible by your school, you can pay for it using a student loan.
Some examples of qualifying expenses for student loans include tuition and fees, transportation, books, supplies, board, and room.
What Can Student Loans Be Used for?
Whether you’re thinking of applying for a student loan or you’ve already applied for one, you need to know what your loan can be used for. Here’s an in-depth look at eligible student loan expenses:
Paying for Student Housing
Obviously, you’ll need somewhere to stay – especially if you went to college away from home, in a different city, or even in a different state. Whether you rented a house or apartment or you were lucky enough to get a campus dorm, you need to pay for housing – and a student loan can help you out if you’re short of money for this.
Covering the Cost of Attendance
Another cost you need to consider is attendance. Each school will calculate your attendance cost, but you shouldn’t trust their calculations too much – you should always see for yourself how much you need to pay. This is because you’ll be able to use a student loan to pay for this, so you must know the sum you need to borrow.
Buying Required Textbooks
You’ll have to purchase various textbooks during your college years, but these textbooks can be very expensive. Fortunately, student loans can be used to pay for these as well. If you want to save some money in the process, you can always rent or buy second-hand textbooks or look up online deals.
The good news is that you’ll be able to sell the textbooks yourself at the end of the year, allowing you to earn some cash that you can then use to pay off some of your debt.
Purchasing Laptops and Computers
Nowadays, computers are fundamental for most college students. Whether you need your laptop in class or you need one to download materials, do research for projects, or communicate with professors or other students, a student loan can be used to buy one.
Paying for Study Abroad
Perhaps you are planning to go abroad for studies, which can be quite expensive. But a student loan can be very helpful in this case. It can pay for your abroad studies, such as groceries, room and board, supplies, and many others.
Covering Transportation Costs
If you don’t live next to the college, you might need to drive there or take public transportation. Not only that, but you may also have to fly home sometimes. Loan money can help you in this case, as well.
Paying for Childcare for Students with Kids
Are you a parent pursuing higher education? In this case, you should know that student loans can also be used for expenses related to child care.
Things You Shouldn’t Use Your Student Loans for
As you can imagine, there are also some specific things a student loan shouldn’t be used for, such as:
Paying for Travel
The thought of going on a vacation can be exciting, but you can’t use your student loan money for this. You might accrue interest if the lender discovers this.
Covering Business Expenses
Many students may be thinking of opening a business and using student loan funds for this. However, you should never do this, as you may end up being in debt for ages after getting your degree.
Purchasing New Clothes
Most people love buying clothes, and having a student loan on hand may be very tempting. Still, you should only use your own money for this – it’s not worth getting into debt for fashion’s sake.
Buying Expensive Meals
Don’t use your loan money to pay for fancy meals or drinks at restaurants. Nobody says you cannot go out and enjoy yourself, but make sure you don’t spend your loan funds on this – costs will add up.
Making a Down Payment on a Home
A student loan can only be used for housing expenses like rent or dorm stay, not to make a down payment on a home. You can use more advantageous types of financing for this.
What Happens If You Misuse Your Student Loans?
Misusing your student loans could lead to ugly consequences. That is, of course, if your lender discovers the ordeal. Usually, nobody will monitor your funds 24/7, so you won’t have to worry about anyone tracking your spending habits.
Of course, that doesn’t mean you should start spending the money from your student loan irresponsibly. It’s still not a good idea and you’d be breaking the terms of the loan. You never know when and how the lender is going to find out about it.
You may end up having to pay back the amount you’ve spent with interest, and you may even have your account terminated. The last thing you want is to be forced to repay the full balance immediately.
Despite knowing the potential consequences, many students still spend their loans on unnecessary things. Surveys have revealed how numerous students use their loan money for clothes or travel. This is bad considering what the consequences might be.
Why You Should Return Any Extra Funds from Your Student Loans
Sometimes, students take a bigger loan than they need. Even if you get an offer for a particular loan amount, you do not need to borrow all of it – you can simply take only the sum necessary for your study-related expenses.
So, if you end up having more loan money than necessary, you should return it as soon as possible. The sooner you do it, the higher your chances of paying no interest on it. If you don’t do this, you’ll wake up with interest that you could’ve avoided.
It’s possible to return or cancel a student loan within 30 to 120 disbursement days and not accrue fees.
What Are the Alternatives to Student Loans for Living Expenses in College?
Do you need money for your living expenses and other college-related costs but you don’t want to go through the trouble and stress that come with a student loan? Here are some alternatives:
- Grants and Scholarships – If you can get a grant or scholarship, you’ll benefit from money that you will not have to pay back, which is great.
- Use Your Savings – Saving money during your school years can help you more than you think. When you finally need money for your tuition and other expenses, the savings will be at your disposal – and you will not owe anything to any institution since the money is yours.
- Consider a Part-Time Job – What better way to get money than getting a job? Your time will be limited because of the classes you’ll have to attend, but you can always work part-time. The income you get can be used to pay for your studies.
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Now you should know how you can and cannot spend your student loan. Even though nobody is watching what you’re spending your loan on, you shouldn’t be irresponsible. If the financial institution finds out, you can deal with severe consequences.