What Can Student Loans Be Used For — Besides Just Tuition?

When you take out a student loan, spending the cash on whatever you want can be tempting. But it’s important to remember that the lender isn’t writing you a blank check.

Generally, you can use federal and private student loans for living expenses and education costs. But remember that you’ll pay student loan interest on all the funds you use. If you spend student loan money on non-approved expenses, the lender may terminate the loan and block you from borrowing more. Here’s a closer look at what falls into approved categories.

What can student loans be used for?

Lenders permit borrowers to use their loans on education costs and basic living expenses while you attend college. Whether they be first-year costs or expenses later on, they may include:

• College tuition: Tuition is the basic cost of enrolling in classes and makes up a big chunk of the cost of college.
• Fees: Your school might charge academic fees associated with your degree program or institutional fees that cover things like parking at the school and using campus facilities.
• Room and board: Student loans can be used for living expenses and meals while you’re enrolled in school. These may include on-campus housing, like a dorm room and cafeteria meal plan, or off-campus housing expenses, like rent for an apartment, utilities and groceries.
• Books and supplies: Student loans also cover supplies you need for class, including textbooks, pens, notebooks and backpacks.
• Transportation: While you can use loans to pay for the costs of getting to class — like gasoline, parking passes, bus passes and highway tolls — you should not purchase a car with your loan funds.
• Equipment: If you need equipment to participate in your classes, like a laptop, software program or camera, these are likely covered expenses.
• Dependent care expenses: You may be able to use student loans to pay for child care or adult care while you attend classes.

What can’t student loans be used for?

Check your loan agreement for approved uses (sometimes labeled as “intended use”) and avoid spending on non-essentials, vacations or repaying other debts.

When you take out a student loan, you’ll typically sign a loan agreement that outlines what you can and can’t spend your funds on. Pay attention to this information because you could face serious consequences if the lender learns you misused loan funds. For instance, the lender may terminate the loan, requiring immediate repayment. You may also become ineligible to borrow in the future.

Generally, you shouldn’t spend your student loan money on:

• Entertainment: Your loan funds aren’t meant to pay for things like concert tickets, streaming services and movie passes.
• Nonessentials: High-end clothing, a gym membership or a new TV aren’t considered necessary education expenses.
• Travel: You shouldn’t use student loans to pay for vacations, like a spring break trip, but you might be able to use the money to pay for an accredited study abroad program. Contact the lender and ask for details.
• Dining out: You can use your student loans to pay for meal plans and groceries, but some private lenders may prohibit restaurant costs or takeout food.
• Other debts: Don’t use your student loan to pay off other balances, like credit cards and auto loans.
• Emergency funds: Generally, it’s a good idea to keep three to six months’ worth of expenses in savings — but your student loans shouldn’t be used to fund this, because it’s money you’ll have to repay in the future.

Federal vs. private student loan spending restrictions are typically similar.

What happens to the financial aid I don’t use?

It’s important to borrow only as much as you need through student loans. Remember, the more you borrow, the more you’ll have to pay in interest charges over time. If you can cover some expenses out of pocket or through scholarship or grant money, it’s often a better choice to do so. To minimize the amount you need to borrow through student loans and shrink your postgraduation loan payments, start by creating a budget.

With that said, sometimes students overestimate how much money they truly need through student loans. If you have money left over after paying for your education and living expenses, ask the lender if you can return the remaining funds or cancel part of the loan. If this option isn’t available, you can use the money to make extra payments toward your outstanding balance.

Bottom line

Understanding the fine print and limitations of what you can spend loan funds on is an important way of protecting yourself as a borrower. Limiting what you borrow to cover only necessary expenses can save you interest over time.