How Student Loans Can Be UsedNovember 5, 2021
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:
- Tuition and fees: These are class costs, from enrollment fees to activity or lab fees, required of everyone.
- Books: You can use your student loan money to pay for required textbooks. You can’t, however, use the money to buy books for pleasure reading.
- Required equipment and supplies: In some cases, you might be required to purchase specific supplies, such as book bags, notebooks and pens each year. Additionally, some classes require specialized equipment. All of these required items can be paid for with student loan money.
- Computers: If you’re using your laptop for school purposes, you can use your student loan money for that purchase.
- Housing expenses: Your student loan money can be used to pay for on-campus or off-campus housing. It’s important to note that if you will be in off-campus housing and you will be using student loan money to pay for rent, you should consider limiting your student loan portion to what’s comparable to on-campus housing. For example, you wouldn’t use your student loan money to get a luxury apartment with a rental rate that’s twice what you’d pay for an on-campus housing arrangement.
- Meal plans at the school: What can student loans be used for? Well, you can use that money to purchase a meal plan at the school. It’s also possible to use the money to buy groceries if you live off-campus.
- Transportation, including parking and bus passes and gas: If you need to pay to get to school, you can use your student loan money to cover those regular costs. This means that if you need a parking pass for a school lot or a bus pass to get to school, you can use student loans for those costs.
- Study abroad: When you do a semester abroad, it’s possible to use your student loan money.
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:
- Travel: You’re not supposed to use your student loans for “fun” travel, including spring break travel.
- Dining out: While you can buy groceries and pay for a meal plan, going out to eat isn’t considered a cost of attendance.
- Gym memberships: There’s a good chance your university has gym facilities that you can access due to the various fees you’ve paid. Your student loans shouldn’t be used to pay for a gym membership.
- Entertainment: Don’t use your student loan money for movie tickets or sporting events.
- Clothing: Your student loan money isn’t meant to supplement your wardrobe, and it shouldn’t be used for clothing.
- Buying a car: Avoid buying a car with student loans.
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.*