What Can I Use Student Loans For? Approved and Prohibited Expenses

Federal and private student loans can help pay for more than just tuition and fees. You can use student loans to cover your school's total cost of attendance, which includes housing, food, books, and other education-related expenses. But student loans aren't meant to cover every expense, especially nonessentials like vacations or restaurant meals.

Misusing student loan funds could violate your loan agreement and leave you with unnecessary debt. That's why it’s so important to understand how student loans can be used before you start spending the money.

Compare private student loan rates

What are student loans meant to cover?

Student loans are meant to cover the costs related to your education. 

“The Department of Education is very clear on both the FAFSA and the Master Promissory Note that federal financial aid, including student loans, can only be used to pay for authorized educational expenses,” says Cathy Mueller, executive director of Mapping Your Future, which provides free financial aid information and services.

These authorized expenses are part of your school's cost of attendance, which includes: 

• Tuition and fees
• Room and board
• Books and supplies
• Transportation
• Dependent care 
• Personal expenses

Private lenders also typically expect you to use student loans only for education-related expenses. 

What expenses can student loans be used for?

You can use student loans to help cover the cost of earning your degree. Some approved student loan expenses include:

• Tuition and mandatory fees: Lenders send student loans directly to your school’s financial aid office, which subtracts tuition and fees before sending any remaining amount to you. 
• Books, supplies, and equipment: These include required course materials along with other supplies, like a laptop or notebooks, that you need for school. 
• On-campus housing: If you're living in a dorm, your school will automatically deduct these costs from your loan proceeds.
• Off-campus housing: If you're living off-campus, you can use student loans for rent and utilities.
• Meal plans and groceries: Student loans can also be used toward reasonable food costs. 
• Transportation: Eligible expenses include bus or subway passes, gas for getting to and from school, and parking fees. 
• Study abroad: You can use your student loans to pay for a semester or year in another country. 
• Personal costs: You can use student loans for certain miscellaneous living expenses, like sheets, towels, kitchenware, and toiletries. 
• Childcare: If you're a parent, you may be able to use student loans to cover the costs of childcare. 
• Disability needs: Student loan money can also go toward disability-related expenses like specialty services, equipment, or personal care items.

What can't student loans be used for?

You can't use student loans for nonessential spending or purchases unrelated to your education. Some examples of what you can't use student loans for include:

• Restaurants or expensive meals: While you can use student loans toward groceries or a meal plan, they're not designed for spending on restaurants or takeout.
• Vacations: You also can't fund spring break or other vacations with loan money. 
• Paying off debt: Don't use student loans to pay off a car loan, credit card balance, or other debt. 
• Buying a car: While you can use student loans toward some transportation-related costs, you can't use them to get a new car. 
• Discretionary shopping: Splurging on new clothes and accessories wouldn't fall within your student loan agreement. 
• Entertainment: Concert tickets, streaming services, or sports games also wouldn't qualify as an education-related expense. 
• Gym memberships: Use your school's facilities rather than using student loans toward outside gyms or exercise classes.

Basically, you can't use student loans on nonessential expenses or anything not related to your education.

What happens if you misuse student loan funds?

Misusing student loan funds would violate your loan agreement with your lender. 

“The misuse of student loan funds is considered a serious offense,” says Mueller. “The borrower could, at the very least, be required to immediately repay the funds and, depending on the severity of the misuse, also face criminal fraud charges.”

Severe misuse of student loan funds is rare, says Mueller, but it can happen. 

“There have been cases where students have used their student loan funds to purchase cryptocurrency, start a business, or buy a vehicle,” she says. “If a college financial aid office suspects misuse of federal funds, they are required to report it to the U.S. Department of Education’s Office of Inspector General, which will then review the case.”

That said, lenders usually aren't tracking what you do with your student loan money after it hits your bank account, so it's up to you to use your student loans appropriately. Overspending with student loan money could also lead to unnecessary and burdensome debt.

“The bigger consequence is the financial costs of not using the funds appropriately,” says Robert Farrington, founder of The College Investor. “You'll still need to pay for your supplies, interest is accruing on the debt, and you'll eventually have to pay it back.”

Every dollar you spend today will cost more in the long run due to interest charges. 

What should you do with leftover student loan money?

If you find yourself with more student loan money than you need, you have a few options: 

• Return excess funds to your lender: You can cancel all or part of a federal student loan within 120 days of disbursement and avoid paying interest or fees on the amount. Contact your loan servicer or school's financial aid office about the process. If you have private student loans, contact your lender about how to return excess funds. 
• Use the funds as a loan payment: You could also apply the funds as a lump-sum payment to your loan servicer, which could help reduce your debt. 
• Save it for upcoming expenses: Another option is putting the funds in a separate savings account and using it for educational costs that come up later in the year, such as rent, groceries, books, or other qualifying expenses.

“If a student is unsure about using student loan funds, they can always check with the financial aid office at the school for instructions and information,” says Mueller.

If you received more student loan funds than you actually need, consider borrowing less in the future. That way, you'll have enough funds to cover your education while minimizing how much debt you have to repay after graduation.