Can you use student loans to cover your living expenses?

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Learn how to use your student loans to pay for education-related living expenses, such as transportation and off-campus housing. (Shutterstock)

Student loans are not just for tuition or textbooks. You can also use them to cover other college-related costs – things like food, housing, and other general living expenses.

Although lenders do not provide loans specific to student living expenses, traditional student loans can help pay for non-tuition fees. Here’s what to know about using student loans to pay for education-related living expenses.

If federal student loans aren’t enough to cover all your costs, you might consider a private student loan. With Credible, you can easily compare private student loan rates from several lenders.

How to Use Student Loans for Living Expenses

You should always apply for grants and scholarships before turning to student loans. Federal student loans, issued by the US Department of Education, should be your first borrowing choice. These loans offer lower interest rates, flexible repayment options, does not require a co-signerand are not based on past history or credit score.

To apply for federal student loans, as well as federal grants and work-study programs, you will need to complete the Free Application for Federal Student Aid (FAFSA) and provide your tax returns, W-2s, and other financial documents. If your parents list you on their tax return as a dependent, you will also need to provide their information.

After the Department of Education processes your application, they will send a letter outlining your expected family contribution, which helps determine your eligibility for federal financial aid. Then you will receive a letter from your school with details of the type and federal aid amount you qualify. If you need more than you’re granted, private student loans — which private lenders provide — can fill the gap. Remember that you may need a co-signer to qualify, as eligibility is based on credit history.

For federal and private student loans, the lender will disburse the funds directly to your school to pay for tuition, room, board, and other authorized fees. If there are funds left over after payment, your school may pay the excess amount directly to you.

You can use this extra money to pay for your living expenses, as long as these expenses are related to your studies.

ARE THERE ANY FAFSA INCOME LIMITS?

What expenses can you pay with student loans?

The federal office of student aid says student loan funds can be used for “qualified education expenses” – and only those that arise while you attend the school where you were deemed eligible for financial aid. .

Allowable education expenses may, of course, include tuition and room and board (on or off-campus accommodation). But it can also include:

  • Books and other supplies
  • Equipment, such as a camera for your photography class
  • Dependent care costs, if your child needs to attend daycare while you attend classes
  • Transport and travel expenses
  • Desktop or laptop computers
  • Study abroad or co-op fees
  • License or certification fees
  • Disability expenses

Since “boarding” is an allowable expense, you can also use your student loan funds for food, but only within reasonable limits. For example, a $100 dinner at a steakhouse would not qualify, but lunch at the campus cafeteria would.

If you need a private student loan because your federal aid doesn’t cover all of your costs, you can easily compare private student loan rates from multiple lenders with Credible.

What expenses cannot be paid with student loans?

You should not use student loan funds for anything unrelated to your education. Misusing your loans could lead to legal issues, or you may even have to repay the money if your lender finds out (more on that later).

Although there is no official list of reasons why student loans cannot be used, you can generally expect your lender to consider the following expenses prohibited:

  • Personal travel – Using your loans to cover a train pass to and from class would be nice, but buying spring break plane tickets for you and your roommate certainly wouldn’t be.
  • Entertainment – You usually couldn’t use your loans to pay for concert tickets or a bowling night. An exception might be if it was required for a class or a school function – like if you had to review a concert for your school’s radio station or attended a field trip for a biology class.
  • Personal care – Gym memberships, hairdresser appointments, pedicures, and other similar services are not eligible for the use of student loans. These should come out of your own pocket.
  • Other debts – Using your leftover funds to start paying off your student loan is a great idea. But you usually can’t use them to pay off your credit card, car loan, or other debt.

If you never know if an expense is eligible or not, contact your student loan officer or your school’s financial aid department. They will be able to tell you with certainty what is and is not eligible for loan coverage.

CAN YOU USE A 529 TO PAY STUDENT LOANS?

What happens if you use student loans for non-educational expenses?

When you take out a student loan, you have to sign a promissory note – basically a contract that outlines the terms of your agreement. Using your loan funds for unapproved expenses would put you in breach of these terms, and your lender may act accordingly.

With federal student loans, for example, you would be required to repay the full amount of your loan immediately if the Department of Education learns that you have misappropriated funds. With private student loans, the repercussions will depend on your lender, but you could face legal action.

Alternatives to Student Loans for Living Expenses

Student loans aren’t your only option if you need help with living expenses. Before turning to loans, consider one of the following alternatives.

Scholarships

Scholarships can be a great way to offset some of the costs of college without taking on more debt. Schools, government agencies, non-profit organizations, and private companies offer scholarships.

Your college’s financial aid office is a good place to start looking for scholarships, or if you’re still in high school, your guidance counselor can also help. You can also use the Ministry of Labor scholarship search tool.

Work study

You can also apply for work-study positions, which are on- and off-campus jobs designed to cover – at least partially – your educational expenses.

Federal work-study programs are one type of federal assistance that may be available to you. Your school may also have other options. Sometimes colleges partner with local businesses to create work-study programs just for specific fields of study. Again, your financial aid office is a good place to start your search.

Part-time work

You can also apply for part-time employment at restaurants, stores, and businesses near your school. Just make sure the times match your class schedule and you still have time to study. You’ll also need to make sure you have the right transportation to and from work, or find something within walking distance.

Lower the costs

Minimizing your costs is essential if you are struggling to cover your general living expenses. Try to find areas where you can reduce your expenses to help yourself. This may mean renting your textbooks instead of buying them, giving up music or TV subscription services for a while, or taking the bus instead of buying gas.

Borrow only what you need

Student loans can help you pay school-related costs, but they’re still debt – and they come with interest. To ensure you minimize these additional costs, it is important that you only borrow what you absolutely need.

If you find yourself with extra cash that you can’t or don’t need to use, consider using it to make an extra payment on your loan. This will reduce your principal balance and interest charges over time. It could also help you pay off your student loans sooner.

If you decide a private student loan is right for you, Credible lets you compare options from several lenders. Its use is 100% free and will not affect your credit.

Garland K. Long