Technically, you’re supposed to only use student loan funds on qualified educational expenses, such as tuition, books, and room and board. However, lenders rarely track how you spend the money, allowing some flexibility in what can you use student loans for.
But even though you could spend your student loan money on non-school-related purchases, it doesn’t mean you should. Spending loan money on nonessentials will result in more interest. You could also face severe consequences if your lender discovers you misused your loan’s funds.
Here’s a general guideline of what you should and shouldn’t buy with your student loans:
- What you can spend student loans on
- What you shouldn’t spend student loans on
Plus:
- Consequences of misusing your student loans
- Returning extra student loan money you don’t need
- Alternatives to using student loans for living expenses
- How to budget your money as a college student
- Frequently asked questions
What you can spend student loans on
The Office of Federal Student Aid and most private student lenders state that all student loan funds must be used for one or more of the following education expenses:
- Tuition and fees
- Room and board
- Groceries
- Textbooks
- Computers
- Study abroad costs
- Transportation to and from school
- Child care expenses
- Miscellaneous expenses
Tuition and fees
Most lenders send your funds directly to your school’s financial aid office to go toward your tuition and fees first. This usually happens at the beginning of each semester.
Your tuition and fees will most likely be your highest cost and can vary widely between schools. The average annual tuition at a four-year public college is $9,970 for in-state students, according to the College Board but $34,740 at a four-year private college.
Room and board
Does financial aid cover housing? Yes, if you’re living in a dorm on campus, your financial aid office will put your student loan money directly toward your housing bill. And if you’re living off campus, you can use your loan funds to pay for your rent, utilities and renters insurance.
The “board” part typically refers to your meal plan. If you opt for a university meal plan, your school will automatically withdraw the payments from your student loan funds. Schools typically offer an unlimited meal plan along with more restricted options, and many require first-year students to enroll in a meal plan.
Once the financial aid office covers your tuition, fees and room and board, if applicable, it will return any leftover student loan money to you.
Groceries
If you’re on a university meal plan, chances are you’ll get most of your food in your college’s dining hall. But if you’re not, or if you need additional snacks, you can spend your student loans on groceries. To avoid overspending, it could help to come up with a weekly or monthly grocery budget.
Textbooks
Once you have your extra student loan money in your bank account, you can use it to pay for textbooks for your college classes.
If you want to save money on textbooks, you should probably avoid your school bookstore. Instead, look for deals from online booksellers, consider renting your textbooks or buy them used.
You can also sell your books at the end of the semester to earn some of your money back.
Computers
A computer or laptop is usually a necessary piece of equipment for a college student, making it an acceptable purchase. You could also use your student loans to cover any other supplies or equipment needed for your studies, as long as it’s within reason.
Study abroad costs
If you’re planning to study in another country, you can use your student loan money to cover your study abroad costs. These could include room and board, groceries, supplies and other expenses related to your education.
Transportation to and from school
If you’re a commuter student, or if you need to fly home for the holidays, you could use your student loans to cover gas expenses, basic car maintenance expenses, a public transit pass, tolls, train tickets or flights to and from home. To reduce costs, you might try carpooling with friends or using a bike instead of a car on campus.
Child care expenses
Parents juggling school and raising a family can use their student loan funds to cover childcare expenses. However, child care isn’t automatically factored into your cost of attendance unless you notify your school’s financial aid office in advance.
Note that you can use loan funds for any dependent you care for, including adults under your guardianship. Also, some colleges have on-campus daycares, and others offer coupons or referral discounts for nearby childcare centers.
Miscellaneous expenses
Your student loan funds are there to help you survive the school year, so don’t feel afraid to use them as needed on other purchases, just so long as they’re essential.
For example, you could use student loans for living expenses and miscellaneous costs such as…
- Personal supplies, like toiletries and medication
- Housing supplies, such as linens, dishes, toilet paper or a microwave
- Other fees, like professional testing, certificates, licensing or additional training programs
- Disability services, such as special services, equipment, transportation or extra supplies to ensure your success in school
What you shouldn’t spend student loans on
While it’s fairly standard to spend student loan money on living expenses, there are other purchases you should not fund with your loans.
In general, it’s best to avoid using student loan funds for anything unrelated to your education, such as:
- Vacation travel
- Clothes
- Expensive drinks and meals
- Down payment on a home
- New vehicle
- Business expenses
- Entertainment
- Expensive electronics
- Other debt
Vacation travel
As tempting as a spring break trip might be, it’s probably not the best use of your student loan money. It doesn’t fall into the qualified education expenses category, and it’ll cost extra due to interest charges that will likely accrue on your debt.
Clothes
Unless you need a warm coat to get through the winter or another necessary item of clothing, using student loans on a shopping spree isn’t worth it. Consider shopping at thrift stores while living on a student’s budget (and even selling what you don’t need).
Expensive drinks and meals
The cost of going out for drinks and meals at high-end restaurants can add up fast. To keep borrowing to a minimum, avoid spending your student loan money on an expensive bar or restaurant outing. This also includes ordering nightly takeout or treating your college buddies to pizza.
Down payment on a home
Your student loans are designated for education purposes, not for a down payment on a home. However, using student loans to pay your monthly rent is acceptable, so long as it’s within the limits of what students at your school typically pay.
New vehicle
You shouldn’t use student loans to purchase a car, motorcycle, bike, electric scooter or any vehicle. This applies even if you live in a rural area and need it to get to school.
Additionally, you generally are not supposed to use student loans for major car repairs (although gas and basic maintenance are OK).
Business expenses
Although you might be tempted to spend your student loan money on a business, this is a risky move. Not only is this expense not approved, but it also could leave you with burdensome education debt that follows you for years after graduation.
The only exception: if an expense is part of your coursework, such as needing to form an LLC as part of a master’s in business administration program.
Entertainment
You can’t use your student loan dollars for entertainment expenses, such as Netflix, movie tickets, live concerts, museum exhibits, festivals or performances at your school.
However, if the event is part of your coursework, you might be able to justify the expense. If in doubt, check with your school’s financial aid office to confirm.
Expensive electronics
Although having a wide-screen TV or a surround-sound stereo system might make you the most popular kid in the dorm, it’s not on the approved list of purchases (as you may have guessed).
And even if you have extra cash, it’s best to use your money toward essential living costs to reduce your potential student loan debt.
Other debt
You’re not allowed to apply excess student loan funds toward your other debt, such as personal loans, credit cards, mortgage payments or auto loans.
This also includes paying for someone else’s education. However, there are certain exceptions, such as paying for your child’s daycare while you attend class (see above).
Consequences of misusing your student loans
Chances are, nobody is going to be watching your bank account to ensure you’re spending your loans on education expenses. That’s why some students spend student loans on nonessentials … and regret their choices later.
In fact, a LendingTree survey from 2019 found that 20% of students had used student loan funds for travel and 26% had used them for clothes. Only 10% said they used student loan funds just for tuition.
But before you make a purchase using student loan money, ask yourself whether you truly need it to graduate. You definitely need a place to live, food to eat and a way to get to school, but you might not need to spend an extravagant amount on entertainment, restaurant meals or trips with friends.
Plus, even though financial aid offices don’t actively monitor (or have the means to track) your use of student loan funds, you could still get dinged for misusing loan money. Although rare, a lender could terminate your loan agreement and demand the money back.
And if you can’t repay the funds, your credit score could be negatively affected, which might impact your ability to borrow money in the future.
What’s more, many schools only have a limited amount of federal financial aid for their student body, which includes federal student loans. If you’re borrowing more than you need, that could mean less student loan funding is available for a classmate in need.
Returning extra student loan money you don’t need
Know that you don’t need to borrow the total amount of student loans you’re eligible to receive. If you have more loan money than you need, consider returning it immediately. You can usually cancel or return federal student loans within 14 to 120 days of disbursem*nt without accruing fees.
It’s advisable to return the unnecessary funds immediately so that you won’t have to pay interest on the amount. If you hold onto the money, you’ll likely repay a larger sum than you borrowed.
Take time to estimate your budget, and make sure to account for everything that goes into your cost of attendance, such as housing, food, a new laptop and bus tickets, for example. If you borrowed more student loans than you need, consider returning that money to the lender rather than using it on nonessential expenses.
Alternatives to using student loans for living expenses
You can borrow to pay for living expenses, but that doesn’t mean you always should. Some alternatives to using student loans for living expenses include:
- Getting a part-time job while in college. You can do this on your own or as part of a work-study program, if you qualify. While you don’t want to take too much time away from your studies, working during college could help you earn money and avoid borrowing too much in student loans.
- Relying on your savings. You could draw on your savings account to cover living expenses if you’ve socked away money while working during high school or school breaks. At the same time, it’s wise to keep some money in your account in case of an emergency. Additionally, if you have a 529 college savings account, you can withdraw the funds tax-free for qualified educational expenses.
- Applying for scholarships and grants. Look for opportunities to win scholarship money you don’t have to pay back.
- Crowdfunding. If you’re experiencing financial hardship and need extra funds to help you through the year, consider launching a GoFundMe campaign or asking friends to donate via a Gift of College or UGift account.
If you’re concerned that your college will put you deeply into student loan debt, you might consider choosing (or transferring to) a less expensive school.
How to budget your money as a college student
Indulging in bad spending habits while living off student loans can hurt you in the long run. Consider creating a budget to help keep your regular monthly spending in check.
That means tracking your expenses, setting limits on what you’ll shell out in specific categories and recalibrating your spending plan when necessary.
Since you might feel tempted to use student loans for anything, it’s worth keeping your student loan money in a bank account separate from your general checking account.
Like any debt, the main goal when taking out student loans is to use as little as possible. The more you use loans for noneducation expenses, the more you may have to pay back, especially if you have a high interest rate.
Resisting the urge to splurge means giving yourself more financial freedom in the future. Think about trying a budget-tracking app to ensure you’re not overspending,
