What can you spend student loans on? Technically, you’re supposed to use student loan money on education expenses, such as tuition or housing. But realistically, you can spend your student loan money on pretty much anything.
However, just because you can spend your student loans on non-school-related purchases, doesn’t mean you should. After all, spending loan money on nonessential items will cost you more in the future due to accruing interest charges.
To avoid taking on more debt than you need, here’s a look at what you should and should not buy with your student loans:
And here’s some more very useful information:
The Office of Federal Student Aid states that all student loan funds must be used for education expenses. These can include:
First and foremost, your student loan money will be applied to tuition and fees. Most lenders will send your student loan funds directly to your financial aid office, which will apply it to your tuition bill. This usually happens at the beginning of each semester.
Your tuition and fees will typically be your largest cost and can vary widely between schools. The average annual tuition at a four-year public college is $9,410 for in-state students, according to College Board, but $32,410 at a four-year private college.
Your next big expense will be room and board. If you’re living in a dorm on campus, your financial aid office will also likely apply your student loan money to your housing bill. If you’re living off campus, you’ll be responsible for paying your rent.
The “board” part of room and board usually refers to your meal plan. If you’re opting for a university meal plan, this will also get taken out of your student loan funds. Schools typically offer an unlimited meal plan along with more restricted options, and many require freshmen to enroll in a meal plan.
Once the financial aid office covers your tuition, fees and room and board if applicable, it will return any leftover student loan money to you.
If you’re on a university meal plan, chances are you’ll get most of your food in your college’s dining hall. But if you’re not or need additional snacks, you can spend your student loans on groceries. To avoid overspending, it could help to come up with a weekly or monthly grocery budget.
Once you have your student loan money in your bank account, you can use it to pay for textbooks for your college classes. If you want to save money on your textbooks, you should probably avoid your school bookstore. Instead, look for deals from online booksellers or consider renting your textbooks or buying them used.
You might also be able to sell your books at the end of the semester to earn some of your money back.
A computer is a pretty necessary piece of equipment for a college student, so you could use your student loan money to purchase one. You could also use your student loans to cover any other supplies or equipment that you need for your studies.
If you’re planning to study in another country, you can use your student loan money to cover your study abroad costs. These could include room and board, groceries, supplies and other expenses related to your education.
If you’re a commuter student or simply flying home for the holidays, you could use your student loans to cover gas expenses, a public transit pass or your flights to and from home. To reduce costs, you might try carpooling with friends or using a bike instead of a car on campus.
Finally, you might draw on your student loan funds to cover the cost of child care. Since you’ll need help with child care while you’re attending classes, this is another necessary cost that would fall into the category of education-related expenses.
While it’s fairly standard to spend student loan money on living expenses, there are other expenses that, if you use student loans for them, mean you could be making poor financial decisions.
In general, avoid paying for anything that isn’t related to your education, such as:
As tempting as a spring break trip might be, it’s probably not the best use of your student loan funds. Not only does it not fall into the qualified education expenses category, but it also will cost you a lot of money in the long run due to interest charges.
Unless you need a warm coat to get through the winter or another necessary item of clothing, it’s not worth it to spend student loans on a shopping spree.
The costs of going out for drinks and meals at nice restaurants can add up fast. To keep borrowing to a minimum, avoid spending your student loan money on expensive bar or restaurant outings.
Your student loans are designated for education purposes, not for a down payment on a home.
Although you might be tempted to spend your student loan money on a business, this is a risky move. Not only is this expense not approved, but it also could leave you with burdensome education debt that follows you for years after you graduate.
Chances are, nobody is going to be watching your bank account to ensure you’re spending your loans on education expenses. That’s why some students spend student loan money on non-essentials and regret their choices later.
In fact, A Student Loan Hero survey found that 20% of students use their student loan funds for travel and 26% use them for clothes. Only 10% use student loan funds just for tuition.
But before you make a purchase using student loan funds, ask yourself if you truly need it in order to get through school and graduate. You must have a place to live, food to eat and a way to get to school; but you don’t need to spend an extravagant amount on entertainment, meals out or trips with friends.
Plus, even though financial aid offices don’t actively monitor (or have the means to track) your use of student loan funds, it is possible there could be consequences for misused loan money. Although rare, a lender could terminate your loan agreement and demand the money back.
What’s more, many schools only have a limited amount of federal financial aid to dole out to its student body, which includes federal student loans. If you’re borrowing more than you need, that could mean there’s less student loan funding available for a student who needs that money to pay for tuition.
It’s also worth noting that you don’t need to borrow the full amount of student loans you’re offered. If you find yourself with more loan money than you need, consider returning it right away. In fact, you can usually cancel or return federal student loans within 30 to 120 days of disbursement without accruing any fees.
The reason it makes sense to give it back ASAP is because you won’t have to pay interest on the amount. If you hold onto the money, you’ll likely end up paying back a larger sum than you borrowed.
So take some time to estimate your budget, and make sure to account for everything that goes into your cost of attendance, such as housing and food. If you borrowed a lot more student loans than you need, consider returning that money to the lender rather than using it on nonessential expenses.
You can borrow to pay for living expenses, but that doesn’t mean you always should. Some alternatives to using student loans for living expenses include:
- Getting a part-time job while in college, whether on your own or as part of the work-study program, if you qualify. While you don’t want to take too much time away from your studies, working during college could help you earn money and avoid borrowing too much in student loans.
- Relying on your savings. If you’ve socked away money while working during high school or school breaks, you could draw on your savings account to cover living expenses. At the same time, it’s a good idea to keep some money in your account in case an emergency comes up.
- Applying to scholarships and grants. Look for opportunities to win scholarship money that you don’t have to pay back.
If you’re concerned that your college will put you deeply into student loan debt, you might also consider choosing a less expensive school.
Bad spending habits when you’re living off student loans can hurt you in the long run. Consider creating a budget to help keep your regular monthly spending in check.
That means tracking your expenses, setting limits on what you’ll shell out in certain categories and recalibrating your spending plan when necessary.
Since you might be tempted to use student loans for anything, it might also be smart to keep your student loan money in a bank account that’s separate from your general checking account.
Like any debt, the main goal when taking out student loans is to use as little as possible. The more you use loans for noneducation expenses, the more you may have to pay back.
Resisting the urge to splurge means giving yourself more financial freedom in the future. To make sure you’re not overspending, try one of these budget-tracking apps.