Credible takeaways
- Student loan funds remaining after you've covered core expenses such as tuition and fees can be used for living expenses.
- There are potential consequences for using student loan money on expenses that aren't education-related.
- Whatever funds you don't use, you can usually pay back to your lender to minimize your debt.
Student loans can be used for any education-related expenses, which include living expenses during college. If you have any student loan money remaining after your school deducts costs such as tuition and fees, you may be able to use it to directly pay for other things you need.
How to use student loans for living expenses
Undergraduate, graduate, and professional students enrolled on at least a half-time basis are all able to use student loans for living expenses. This is because schools are required to include an estimate for living expenses in their Cost of Attendance (COA).
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.
Just be aware that there are some exclusions for how you can use those extra funds.
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?
While student loans can help cover quite a few expenses, keep in mind that you'll have to pay back whatever you borrow - with interest. Because of this, it's important to borrow only what you need so you can keep your future repayment costs as low as possible.
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.
"While you may be able to use a personal loan to pay for living expenses during school, you should avoid doing so if possible. Personal loans can have significantly higher interest rates than student loans, especially if you have bad credit or a limited credit history. You also wouldn't have access to the federal borrower protections associated with federal student loans, like income-driven repayment and other forgiveness plans.
- Richard Richtmyer, Senior Editor, Student Loans
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.
Student loans for living expenses FAQ
How can I live off student loans?
Most student loans can be used for any education-related costs, including living expenses. But keep in mind that some loans will have limitations on how much you can take out each year, and over the course of your education.
For context, here are undergraduate and graduate student loan limits:
- Direct Subsidized Loans: $3,500 to $5,500 per year
- Direct Unsubsidized Loans: $5,500 to $7,500 per year for dependent undergraduates ($31,000 total limit), $9,500 to $12,500 per year for independent undergraduates ($57,500 total limit), and $20,500 per year for graduate or professional students ($138,500 total limit).
- Direct PLUS Loans: Up to the cost of attendance, minus any other financial aid received
- Private student loans: Often up to the cost of attendance (though it varies by lender)
How do I get financial aid for living expenses?
The first step is to register for the FAFSA. This will determine the amount of financial aid that you’re eligible for, based on factors like your student status (independent or dependent), your school’s cost of attendance, and your year in school. If you’re a dependent student, it will also be affected by your Expected Family Contribution (EFC).
How should students pay for monthly expenses?
Ideally, you’d get grants or scholarships to cover those expenses, since they don’t require you to pay back those funds and don’t incur interest charges. You have several other options too, including getting a job, dipping into savings, and using leftover student loan funds.
Can I use my student loan to buy a car?
No. Federal student loans expressly forbid the use of loan funds to buy a vehicle, and private lenders may have similar language in their terms of use. However, you can use student loans to pay for transportation costs to and from your school, including gas, parking, and car repairs.
Can I use my student loan to pay off credit cards?
Generally, no. Student loans cannot be used to pay for expenses that aren’t directly related to education, and paying off existing consumer debt may be forbidden in your loan's terms of use.
