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Knowledge Hub / How Student Loans Can Be Used
How Student Loans Can Be Used

How Student Loans Can Be Used

Paying for College
ELFI | November 5, 2021
How Student Loans Can Be Used

When you get a student loan, the expectation is that you will use the money for school-related expenses. However, school costs are more than tuition. In fact, the cost of attendance often includes housing and books, along with other equipment.  Student loans aren’t unlimited – there’s a maximum amount you can borrow. Federal student loan limits are established by the U.S. Department of Education. Private student loans are generally capped at the school’s cost of attendance.  Once you’re approved for federal or private student loans, the money will be sent directly to your school to cover tuition and fees — and even on-campus housing and other costs. Anything left over might be passed on to you, depending on the school’s policy. So what can student loans be used for? Let’s take a look at what federal student loans can be used for, along with private student loans.

What Private & Federal Student Loans Can Be Used For

So, can you use student loans for anything? Well, the answer is no. Even if you receive extra money, the idea is that you should still be using student loans to cover living expenses and other necessities related to attending school. Here are some of the things that student loans can be used for:

Make sure, though, that you document your student loan expenses. While it’s rare that you’re required to prove how you use the money, it’s usually best if you can show that you’re spending your student loan money on approved costs.

What Student Loans Shouldn’t Be Used For

So now that you know that you can’t use student loans for just anything, it’s essential to stay away from certain expenses. These expenses include:

What Should I Do With Extra Student Loan Money?

The responsible thing to do with extra student loan money is to return the unused portion to the lender to save on student loan interest. If you can borrow a smaller amount, you save money in the long run.

What Happens If You Are Caught Misusing Student Loan Funds?

In many cases, because excess funds are sent to you after the school takes out money for direct expenses, there’s no way for your lender to effectively track how you’re using student loan funds. However, some students are receiving refunds on debit cards, making it easier to see how they use the excess funds. Additionally, if the school’s financial aid office discovers that you’ve misused the money, they can let the Department of Education know, and they could take the money back. It’s handled through the school, so your school would then charge you for the amount rescinded. Even if you don’t get caught, borrowing for items you don’t need means you’ll be paying interest on those purchases for years to come — resulting in increased costs over time. Plus, if you misuse the funds early in the semester, you might not have enough money for necessary expenses like rent or food later on.

Apply for Private Student Loans with ELFI

Private student loans are one way to bridge the funding gap if you still need money for school after getting federal student loans and exhausting other options. ELFI offers a few special perks, including no application or origination fees and dedicated Student Loan Advisors who can support you throughout the process.