How To Use Student Loans for College Living Expenses

You can use student loans to cover more than just tuition and fees. Loan funds can also pay for education-related living expenses, including on- and off-campus housing, utilities, groceries, and transportation. However, there are restrictions on how you can spend student loan money, and using it for non-education expenses can have consequences.

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How to use student loans for living expenses

Undergraduate, graduate, and professional students can use student loans to pay for living expenses, such as housing, food, and transportation. These expenses are included in your school's cost of attendance (COA), which estimates the total cost of attending college for one academic year, including tuition, fees, books, and living expenses.

When your federal or private student loans are disbursed, your school typically applies the funds to tuition, fees, and on-campus housing and meal plans, if applicable. Any money left over is refunded to you, which you can use to pay for eligible living expenses, whether you live on or off campus.

However, there are restrictions on how you can spend these funds, so it's important to understand which expenses qualify.

What can student loans be used for?

Student loan funds are restricted to uses that are directly related to your education — this includes certain living expenses. Some college-related expenses include things like:

• Tuition
• Fees
• Room and board
• Housing utilities
• Housing supplies and furnishings
• Meals and groceries
• Books
• Equipment or supplies
• A personal computer you'll use for school
• Transportation costs (bus pass, gas)
• Dependent child care expenses

What shouldn't student loans be used for?

Student loans are meant to cover education-related costs, like tuition, housing, meals, books, and transportation. Using them for nonessential or personal expenses can lead to unnecessary debt and make repayment harder. 

For example, some expenses you probably shouldn't use your student loans for include:

• Vacations and travel
• A new vehicle
• A down payment on a house
• Entertainment
• Dining out often or expensive meals
• A new wardrobe
• Small-business expenses
• Your other debt
• Anyone else's expenses (like paying for a friend's tuition)

Consequences of misusing student loans

Using student loan funds for expenses unrelated to your education can have financial and potentially legal consequences. Even if you use the money on eligible expenses, borrowing more than you need means taking on additional debt and interest costs. You could also run short on funds for essentials like groceries or textbooks.

The legal consequences of misusing student loans depend on the type of loan you have:

• Federal student loans: Under the terms of your Master Promissory Note, you must use your loan funds for authorized education expenses. If you misuse the money, the Department of Education could require you to repay your entire loan balance immediately. Intentional fraud may also lead to legal consequences.
• Private student loans: Using your loan funds for unauthorized expenses could violate your loan agreement. Depending on your lender's terms, you may be required to repay the loan immediately or face other penalties.

What to do with leftover student loan money

It’s best to borrow only what you need to pay for school and related costs so you can avoid excessive student loan payments in the future. But if you end up with extra funds, there are a few ways to handle it:

• Pay it back immediately: This would allow you to save the most amount of money on your loans, since you’d reduce your principal balance and you wouldn’t have to pay interest on that extra amount — assuming you repay it before an interest charge hits your account. This can vary depending on the type of loan, as well as the lender. With federal student loans, you can cancel some or all of your disbursement within 120 days and return the money to your school.
• Save the money for necessary expenses: If you have fluctuating or limited income, you might have a hard time getting the money you need for rent or other necessities each month. If you know that you’ll need that money to pay for covered costs, like living expenses or a laptop for college, you also have the option to keep that cash and use it over the school year to pay for those costs.

Alternatives to using student loans for living expenses

If you don't want to use loans to pay for living expenses, there are other options you can use:

• Apply for scholarships and grants: Gift aid is always a good option; the key is finding opportunities and sending in a strong application. In general, going after more tailored options (like scholarships for mothers going back to college, or for first-generation college students in your county) may be easier since there's a smaller applicant pool compared with a national scholarship.
• Get a part-time job: This can be a great way to pay for living expenses during college without taking on debt. If possible, look for an option that uses your existing skills and doesn't require too much time. That way, you won't compromise on study time.
• Tap into your savings: If you're lucky enough to have money stashed away, it could make sense to tap into those funds, rather than take on debt to pay for living expenses in college. The key here is to ensure that you still have at least some cushion so you're covered if the unexpected happens.
• Take out a personal loan: A personal loan can help you get up-front funds to cover your living expenses. You'll then repay the loan in monthly installments. Keep in mind that your interest rate is determined by your credit score and income, among other factors, so if you haven't established a credit history, you may not qualify.