Starting college this fall? You’re probably thinking about how to decorate your side of the dorm room, what clubs you’re going to join, and wondering what your classes may be like. But, in the back of your mind, you may be worried about managing money and handling student loans.
According to The College Board, undergraduate students take out an average of about $6,500 per year in federal student loans.
Borrowing the minimum you need — and using your money wisely — is key to managing your loans after graduation. But what can student loans be used for (and what expenses are prohibited?) All student loans have some restrictions on how the money can be used, so understanding what’s a qualifying expense is key.
What Can Student Loans Be Used For?
When colleges determine your financial aid package — which may include student loans — the financial aid office takes into consideration the school’s total cost of attendance — how much students typically spend on their education at that college during the academic year.
Tuition and Fees
Likely one of your largest expenses, you can use your student loans to pay for your semester’s tuition and school-required fees, such as lab fees or health insurance premiums paid to the college.
Room and Board
Do student loans cover housing? Yes, even if you decide to live off-campus, you can use student loans to foot the bill. Student loans funds can pay your rent, dorm fees, and the cost of your meal plan or groceries.
Textbooks and Supplies
Your student loans can help you with the cost of your textbooks and necessary supplies, such as a laptop for classwork and lab expenses.
Dependent Care
If you have to pay for childcare — or care for another family member — you can use your student loans to cover the cost.
Tip: If you have dependent care expenses, contact your financial aid office when you submit the FAFSA and notify them of your costs. The office may have to modify your cost of attendance and aid to accommodate your need.
Transportation
Student loans can pay for the cost of transportation to and from school, including the cost of a train pass or gas.
Prohibited Uses of Student Loan Funds
Student loans can cover a broad range of expenses, including your rent, groceries, and bus pass. However, your student loans do have some limitations; they can only be used to pay for expenses directly related to your education. So, what can’t you use your student loans to pay for? Prohibited uses include:
- Buying a car: Although loans can cover transportation expenses, they aren’t meant to pay for the purchase of a new or used car.
- Entertainment: Entertainment is a luxury expense, so streaming services, movie nights, concert tickets, and other splurges are not eligible expenses.
- Travel: Student loans can’t be used for spring break trips or other vacations.
- Restaurants or takeout: While your loans can pay for groceries or a college meal plan, they’re not meant for restaurant or takeout meals.
Deciding How Much to Borrow
When you receive your financial aid package, you may be eligible for a larger loan amount than you really need. While it can be tempting to take out a larger sum to cover other expenses, keep in mind that borrowing more than you strictly need can be costly; more interest will build thanks to the larger balance, and it will be harder to pay off your loans after graduation.
Create a budget for the academic year to help you map out your expenses, what money you have coming in, and how much you need to borrow.
Answers to Your Student Loan FAQs
Can student loans be used for living expenses?
Yes, student loans can be used for living expenses like rent or dorm fees, meal plans and groceries, and textbooks.
Can you use a student loan to buy a car?
No, student loans cannot be used to purchase a car. You can use your loans to pay for basic transportation expenses, such as the cost of a bus or train pass or gas for your own car, but you can’t use the money to buy or lease a car.
Can you use student loans for sorority or fraternity dues?
Sorority and fraternity fees aren’t required of all students, and aren’t paid to the college; as a result, they aren’t part of the school’s cost of attendance. Student loan funds aren’t intended for paying Greek Life dues, so you’ll need to find other financing options, such as club payment plans or scholarships.
What happens if you use student loans for something else?
When you take out a student loan, you have to sign an agreement — under penalty of perjury — stating that you’ll only use the loan funds for eligible education expenses. If you violate that agreement, the lender can demand you repay the loan in full, immediately.
