How To Use Student Loans for College Living Expenses

You can use student loans to cover a wide range of college costs, including both on- and off-campus living expenses. If you have any money remaining after your school applies your loans to tuition and fees, you may be able to use it to pay for things like housing, rent, utilities, food and groceries, and transportation.

How to use student loans for living expenses

Undergraduate, graduate, and professional students enrolled at least half-time can use student loans to cover living expenses. This is because schools are required to include an estimate for living expenses in their Cost of Attendance (COA) — the total amount it will cost you to attend for one academic year, including tuition, fees, housing, meals, books, and transportation.

After your federal or private student loans are disbursed to your school, these funds are primarily used to cover tuition and fees. Any remaining balance is then paid out to you, unless you decline it. These leftover funds can be used to pay for your living expenses, whether you live on or off campus.

Just be aware that there are some exclusions for how you can use those extra funds.

See Also: Is It Cheaper To Live On Campus or Off?

Current private student loan rates

What can student loans be used for?

Student loan funds are restricted to uses that are directly related to your education — this includes certain living expenses. Some college-related expenses include things like:

• Tuition
• Fees
• Room and board
• Housing utilities
• Housing supplies and furnishings
• Meals and groceries
• Books
• Equipment or supplies
• A personal computer you'll use for school
• Transportation costs (bus pass, gas)
• Dependent child care expenses

What shouldn't student loans be used for?

Student loans are meant to cover education-related costs, like tuition, housing, meals, books, and transportation. Using them for nonessential or personal expenses can lead to unnecessary debt and make repayment harder. 

For example, some expenses you probably shouldn't use your student loans for include:

• Vacations and travel
• A new vehicle
• Down payment on a house
• Entertainment
• Dining out often or expensive meals
• A new wardrobe
• Small-business expenses
• Your other debt
• Anyone else's expenses (like paying for a friend's tuition)

Consequences of misusing student loans

There are several risks associated with misusing your student loan funds, including owing more in debt. In most cases, it's best not to spend money on non-essential expenses because you'll still have to repay that debt back with interest.

Additionally, spending more money than what's budgeted in your school's official cost of attendance means you could end up with fewer funds needed to pay for other expenses like textbooks or groceries.

Federal and private student loans also have their own consequences for loan misuse:

• Federal loan consequences: Misusing student loans can result in legal consequences, and borrowers risk being legally prosecuted. The Department of Education has a hotline where cases of misused federal student loan funds can be reported. Misusing funds may be considered fraud, as it violates the terms outlined in the Master Promissory Note loan document that borrowers are required to sign.
• Private loan consequences: If your lender finds out that you've been using funds improperly, there is a possibility that your loan will go into default right away. This can have a negative impact on your financial situation.

If you're worried that you've already used some of your funds in the wrong way, chalk it up as a lesson for how not to spend funds in the future. You could also consider saving money from a job or other income source to replace those funds.

Alternatives to using student loans for living expenses

If you don't want to use loans to pay for living expenses, there are other options you can use:

• Apply for scholarships and grants: Gift aid is always a good option; the key is finding opportunities and sending in a strong application. In general, going after more tailored options (like scholarships for mothers going back to college, or for first-generation college students in your county) may be easier since there's a smaller applicant pool compared with a national scholarship.
• Get a part-time job: This can be a great way to pay for living expenses during college without taking on debt. If possible, look for an option that uses your existing skills and doesn't require too much time. That way, you won't compromise on study time.
• Tap into your savings: If you're lucky enough to have money stashed away, it could make sense to tap into those funds, rather than take out debt to pay for living expenses in college. The key here is to ensure that you still have at least some cushion so you're covered if the unexpected happens.
• Take out a personal loan: A personal loan can help you get up-front funds to cover your living expenses. You'll then repay the loan in monthly installments. Just keep in mind that your interest rate is determined by your credit score and income, among other factors; so if you haven't established a credit history, you may not be able to qualify.

Other ways to potentially lower your costs overall include:

• Buying used textbooks or renting them
• Living off-campus and getting a roommate (or living at home, if possible)
• Carpooling with a friend who has a similar schedule to you

What to do with leftover student loan money

It’s best to borrow only what you need to pay for school and related costs so you can avoid excessive student loan payments in the future. But if you end up with extra funds, there are a few ways to handle it:

• Pay it back immediately: This would allow you to save the most amount of money on your loans, since you’d reduce your principal balance and you wouldn’t have to pay interest on that extra amount — assuming you repay it before an interest charge hits your account. This can vary depending on the type of loan, as well as the lender. With federal student loans, you can cancel some or all of your disbursement within 120 days and return the money to your school.
• Save the money for necessary expenses: If you have fluctuating or limited income, you might have a hard time getting the money you need for rent or other necessities each month. If you know that you’ll need that money to pay for covered costs, like living expenses or a laptop for college, you also have the option to keep that cash and use it over the school year to pay for those costs.