What Can I Use Student Loans For?

Abigail Eun
Abigail Eun

Abigail Eun is a freelance writer and personal finance expert. Through diligent research and continuous learning, she has honed her knowledge in budgeting, saving, investing, and debt management. Abigail is passionate about helping people get their finances in order. She believes that everyone should have access to the information they need to make sound financial decisions. Her goal is to provide clear and concise information that is easy to understand.

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November 1, 2022

Borrowing a student loan is a big decision. Figuring out how much to borrow, where to borrow from, and how to navigate getting the money where it needs to go can be confusing.

Before anything else, you should consider what you intend to use the loan money for. While student loans need to be used for academic expenses, there are a variety of items that fall under that umbrella.

If you’ve ever wondered, “What can student loans be used for?,” you’re in the right place. Keep reading to learn about the do’s and don’ts for student loan usage.

What Can Student Loans Be Used For?

Student loans can only be used for academic expenses. Here are some of the common expense categories that qualify as an academic expense. 

Tuition and Fees + Room and BoardYour institution will usually take a portion of your student loans to cover costs such as tuition and fees, room and board, and your meal plan. You will not have to pay the university directly.
Institutional FeesIf your school has mandatory health insurance, parking fees, or other institutional requirements, you can spend a portion of your student loans to cover these costs. 
School-related Living ExpensesStudent loans can be allotted to cover personal expenses that are necessary for your educational career (ex. a desk lamp to study, new bed sheets, or a microwave). 
Books and SuppliesYour student loans can cover anything from textbooks, to notebooks, to multicolor highlighters, to a new bookbag.
Transportation CostsWhether you commute or drive to school, you can use a portion of your student loans to cover transportation costs like gas, bus fares, etc. 
Child Care ExpensesIf you are supporting yourself in addition to a dependent, you can use your student loans to cover child care expenses, whether that be daycare, baby food, or other child-specific necessities. 
Study Abroad ExpensesIf you decide to study abroad, you can use a portion of your student loans to cover any related expenses. Note that the study abroad must be either approved by or offered by your school to be a qualifying expense. 

Generally, federal student loans and private student loans have the same guidelines for usage, but make sure to double-check with your lender before spending any money. 

What Student Loans Can’t Be Used For

Your student loans cannot be used to cover any personal expenses like:

  • Travel: Unless you go on a study abroad/school trip, you cannot use your student loans to fund personal travels. 
  • Entertainment: Dinners with friends, movie tickets, and retail therapy cannot be covered by your student loans. 
  • Personal finances: Down payments for a house, credit card payments, and other personal finances do not qualify as educational expenses. 

These expenses must be paid for with your own money. 

What Happens If You Use Student Loans for Something Else?

As tempting as it may be, it is extremely ill-advised to use your student loans for anything other than educational expenses for the following reasons:

  1. Using your student loans for other expenses is essentially breaking a legal contract. The promissory note/loan agreement you signed when you took out the loans specifically outlines that you agree to only use your loan for educational expenses. Therefore, breaking this legal agreement you signed under “penalty of perjury” can have serious consequences.  
  2. While schools don’t actively look for student loan misuse, if you are caught for this charge, you may be reported to the federal Department of Education and have your student loan money taken away. 
  3. Beyond all legal reasons, misusing your student loan money can put you in more debt than you initially started with. Depending on your loan repayment plan, your debt will begin to accrue interest either after you graduate or from the first loan disbursement. If you use your student loans to buy nonessential items, you will end up having to pay more for the accrued interest on your debt. 
  4. If you deplete your student loan balance quickly, you may not have enough money to pay for future educational expenses. 

What About Student Loan Refunds?

After covering all of your educational costs, including transportation, school supplies, and institutional fees, you may still have some money left. 

Experts recommend that you do the following with the remaining student loan refund balance you have:

  1. Return the money if your lender does not charge prepayment penalties. In addition to lowering your balance, returning the extra money will prevent unnecessary interest from accruing. Contact your lender to determine how you can return any excess student loan amounts. 
  2. Save the money. You may have future educational expenses you can put the money toward. Put the remaining balance into your savings account for unforeseen circumstances. 
  3. Use the money on your initial loan payments. With the extra cash you have, you can lower your debt even before repayment starts. If your repayment starts as soon as the loan is disbursed, you won’t have to pay out of pocket for your initial repayment.  

Closing Thoughts From the Nest

Using your student loans responsibly is crucial to be out of debt quicker. Remember to use your student loans for academic purposes only and return or save what remaining balance you may have. 

If you’re looking to explore private loan options, consider using Sparrow. Sparrow allows you to visualize the cost of your loans side-by-side so you can compare options and know exactly how much you’ll be paying off in your repayment period. 

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