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Knowledge Hub / Can Student Loans Cover Living Expenses?
Can Student Loans Cover Living Expenses?

Can Student Loans Cover Living Expenses?

Paying for College
ELFI | June 16, 2021
Can Student Loans Cover Living Expenses?

Student loans are a beneficial resource to pay for higher education. But if you don’t have a job you may be wondering if you can use student loans to cover living expenses. The answer is often yes, but there are a few caveats to keep in mind.    When you take out student loans for school, the maximum you can borrow is based on the school’s individual cost of attendance (COA). Each school’s cost of attendance is unique and factors in certain cost of living expenses.    A school’s COA typically includes an allowance for tuition, housing, transportation, books, supplies and meals. So can student loans cover living expenses? In many cases, yes, but the amount and types of expenses will be limited by your school and student loan provider. To determine the maximum amount you can borrow in student loans, the school will calculate the COA minus any aid, such as scholarships, that you receive. 

Can You Use Student Loans to Cover Living Expenses?

When borrowing student loans, the student will have to sign a document promising to repay the funds with interest. This document, known as the Master Promissory Note or Promissory Note for federal and private student loans, outlines when student loans can cover living expenses. When you think of living expenses, you may be tempted to include expenses outside of your actual needs. Here are the living expenses that can often be covered with student loans based on the promissory notes:   

Expenses Not to Use Student Loans For 

Although your lender may not outline exactly how student loans can be used, it is best not to spend the funds on these types of purchases:  

Reasons Not to Use Student Loans to Cover Living Expenses

Whether you are borrowing federal student loans or private student loans, the loans are meant to be used for educational expenses. So using the funds on nights out with your friends or a flat-screen tv would not qualify. But that is not the only reason you should consider paying for these expenses from another source. Here are some other reasons to consider:   

Alternatives to Using Student Loans for Living Expenses 

If you have to use student loans for living expenses, try reducing your expenses so you aren’t relying on your student loans so heavily. Here are a few ways to reduce your living expenses:  

Refinance Your Student Loans

If you wind up borrowing a significant amount of student loans for living expenses and are facing large student loan payments, consider student loan refinancing.    Refinancing your loans could help save you on interest costs if you qualify for a lower interest rate. You could also reduce your monthly student loan payments by extending your payment term when you refinance. Explore our website to learn about the benefits of refinancing student loans with ELFI.*