What Can a Student Loan Be Used For?

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There are a variety of ways students with federal student loans can spend their student loan money. First and foremost, loan funds will be used to pay for education expenses. Typically, with both private student loans and federal student loans, education expenses will take priority.

Given the rising costs of university living expenses and education expenses, affording college can be a struggle for many students. Taking out federal or private student loans can help students afford their dream school.

In regard to education expenses, student loan funds should be used for any cost or expense that is included in your university’s attendance expenses. Obviously, your loan will be used to cover your tuition. Student loan funds can also be used to pay for:

  • Textbooks and school supplies
  • Class equipment
  • Digital devices and software
  • Living expenses
  • Meal plans and food
  • Transportation fees
  • Study abroad programs
  • Dorm and living supplies

Most costs that can be justifiably related to your education can be covered with student loan money. Remember to use your student loan funds wisely. Check with your college or university to get a better understanding of how much your education will cost.

Create a free profile with Bold.org today to start applying for scholarships. Scholarships are a free form of financial aid that you can use to help pay for college, along with any student loans you may have already taken out. Browse through the full list of scholarships available on Bold.org.

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Bold.org is a reliable source of information for guides on how to navigate college expenses and student loan debt. Whether you are in the midst of your college application process or approaching graduation, financial aid guides can be incredibly helpful for student finances.

Don’t forget that oftentimes, the sticker price of a school is lower than the actual cost— you will still need to pay for your personal expenses, food, and textbooks, for example. Some colleges may not include living expenses and housing in the listed cost. If you still have student loan money after covering the cost of tuition and housing, consider using your loan funds for these smaller expenses.

Make sure to do enough research about the school you plan to attend so that you can take out the necessary amount of loan funds. Taking out more federal student loans than necessary can lead to more student loan debt in the future, which should be avoidable with research.

What should you not use student loan money for?

Typically, student loan money should not be used for unnecessary expenses or costs unrelated to your education. Although some personal expenses can be covered by loan money, such as food, these kinds of personal expenses are necessary. Avoid using student loan money to pay for frivolous expenses or extravagant items.

Here are some examples of what student loan money should not be used for.

  • Treating friends or family at restaurants
  • Vacation expenses
  • New clothes
  • Movie or sports tickets
  • Alcohol

A good rule of thumb is that if you can survive without it, you shouldn’t use loan money for it. Some of these categories may seem similar to the above examples of what student loan money can be used for. For example, we covered that loan funds can be used for travel and food expenses.

However, treating larger groups of people to dinner with your student loan funds is likely a misuse of your loan. The loan is meant to cover only your necessary educational expenses— not social dinners and not the dining expenses of others. Similarly, while travel expenses may be necessary for those who take a bus or subway ride to go to class, day trips and vacations are not necessary expenses.

In general, students should absolutely avoid using their student loan money for anything that falls under the entertainment category. While it’s good to maintain your social life in college, make sure to do so with your own personal funds. Partying or going to concerts with friends is unrelated to your education and also unnecessary for your physical well-being in college, so avoid spending loan funds on those areas.

Can you use your student loan for anything?

No, you can not use your student loan for anything. There are two reasons for this: first, it’s not a smart financial decision. Secondly, using your student loan for certain things will break the terms of your loan agreement, which may result in significant consequences.

Though loans are often a necessary source of money for funding your college education, keep in mind that loan debt will accrue interest over time. Read our guide on loan repayment to learn about the details of paying back your loan.

When taking out student loans, most lenders, whether dealing with private student loans or federal student loans, will require you to sign a loan agreement. Typically, this agreement will stipulate what you can and cannot spend your loan funds on.

Breaking the terms of this agreement may result in serious consequences. Though the odds of your lender going through your bank statements are low, it’s still not a good idea to use your loan money unwisely.

Interest and loan payments are the main reasons why students should not spend their loan money on unnecessary things. Though you may not get caught by your lender if you use your loan to pay for entertainment or other unnecessary personal expenses, it is not a wise financial decision.

Student loans need to be repaid through monthly payments. In addition, student loans will collect interest, as mentioned. Because of this, the longer it takes a student to repay the full loan, the more money they will have to pay in the long term for interest.

Most people make financial decisions based on how important something is to them and how much it will cost. Though spending loan money on entertainment may seem worth the cost, remember that because you used money from a loan, you’re also going to be paying interest for what you spent.

Paying interest on educational expenses makes sense— getting a college degree is necessary for many jobs. However, it doesn't make sense to accrue interest for what you spent on a concert or mall trip.

How can I pay for college besides taking out student loans?

Though student loans are necessary for many students, due to the interest and repayment costs, students should explore ways to supplement their student loans as well. The less money you need to take out in federal student loans, the better. Financial aid from your college and scholarships are two excellent ways to raise money for college without going into debt.

Financial aid packages can greatly decrease the cost of your education expenses at your school. Research which financial aid opportunities you may be eligible for at your university. Many colleges offer financial support if students demonstrate financial need, so be sure to contact an advisor at your school to ask about the financial aid program.

Like financial aid, scholarships do not need to be paid back and, therefore, will not require interest payments. Though some scholarships will likely be available through your university’s financial aid office, many more scholarships can be found through online scholarship platforms like Bold.org. Check out this guide on how to get a scholarship for college.

What can I do with leftover student loan money?

Though it might seem counterintuitive, leftover loan money should not be used for your personal spending. Loan money can be used to pay for necessary educational and living expenses, but it may not be financially smart to use the leftover money for entertainment.

There are a number of reasons why one might end up with excess student loan funds. Perhaps you received some unexpected financial aid that greatly lowered the cost of your education. Perhaps you switched to a less expensive housing option, lowering your living expenses. Whatever the reason, it’s important to understand how to best use the remaining money from your loan.

Usually, the best option is to just return your unused student loan money to your lender. Even if you want to use the leftover loan funds on something reasonable, consider whether that item is worth paying loan interest for. The problem with using leftover money from loans is that interest will always be attached to those funds.

For most federal student loans, interest will not be collected when returning loan money within the first few months of taking out the loan. By doing this, you can easily avoid making unnecessary interest payments further down the line.

For private student loans, you may be charged interest anyways. However, paying back a small interest fee for a few months is much cheaper than paying back interest collected over several years.

Alternatively, you could use the leftover money from your loan to pay for your first few loan payments. You may not realize you have extra loan money until after the return deadline passes. In that case, it’s best to keep the extra loan money for your first few monthly payments.

Frequently asked questions

How can I use my student loan to build credit?

Your credit history affects whether or not your bank views you as financially stable and trustworthy. As a result, your credit history is critical. Your credit score can affect whether an application for a credit card is approved, your mortgage payment for your first home, and how likely a lender will give you a loan.

Several different credit scoring formulas exist, but the FICO credit score is likely the most widely known scoring model. According to this model, your payment history makes up 35% of your credit score. Therefore, your payment history is the most significant factor in calculating your credit score.

Making a payment late or missing a payment will harm your overall credit score. Monthly payments on your loan will fall into this category, which means that it’s imperative to ensure that you can meet your monthly payments on time and pay them in full each time.

Improving your credit score can be an unexpected byproduct of taking out a loan, provided you meet your agreed-upon monthly payments on time and in full. If you're having trouble meeting your monthly payments, read this guide on how long it takes to pay off student debt.

Can you use student loans for a car?

No, you cannot use your student loans for a car. Though it’s tempting to spend any leftover money from your student loan on things you want to buy, it’s not a wise decision. Firstly, this will likely break the terms of the loan agreement you signed when you took out the loan.

Secondly, your loan's interest rates likely mean the car will be much more expensive in the long run than it should be. Buying a car with your remaining loan money will probably result in either legal consequences or paying much more money than you would have if you’d paid out of pocket.

Ever wonder what happens if you don’t pay your student loans?