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When you apply for financial aid and take out student loans to pay for college, you’re not always limited to using that money solely to cover tuition and fees. Most lenders — including the federal government and private student loan lenders — allow you to use your loan funds to pay for other education expenses in each school year.
That’s important to know, as tuition and fees make up only a portion of your actual bill. According to the US Department of Education, your total cost of attendance is the full amount you’ll pay to go to college each year. The cost of attendance includes tuition and fees, room and board, books, supplies, transportation, loan fees, and other select expenses.
The College Board reported that the average total cost of attendance is $26,590 for an in-state student attending a four-year public university and $53,980 for a student attending a private four-year school.
If you’re trying to figure out what exactly your student debt can be used for (and what they shouldn’t be used for), here’s what you should know.
Federal Student Loans vs. Private Student Loans
If you need to borrow money to pay for higher education, we recommend starting with federal student loans. They usually have lower interest rates and have more repayment options than private loans. However, some federal loans have caps on how much you can borrow each year — and have an aggregate limit — so they may not cover your total cost of attendance.
Filing the FAFSA
To qualify for federal aid, you need to fill out the Free Application for Federal Student Aid (FAFSA). It’s what the government, states, and universities use to decide if you should receive scholarships, grants, and federal student loans.
You can complete the FAFSA online. You’ll need the following information:
- Your Federal Student Aid ID
- Social Security number (or Alien Registration number if you’re not a U.S. citizen)
- Driver’s License number, if you have one
- Parents’ tax returns
- Parents’ bank statements and records of investments or other assets
- A list of schools you’re interested in attending
The financial aid offices of the schools you list will all get a copy of your FAFSA, and will use that information when creating your financial aid package for their school.
What Borrowers Can Use Student Loans For
Whether you take out federal or private student loans, your student loan funds can be used to pay for school-certified educated expenses. According to the Office of Federal Student Aid, you can use your loan amount for the following purposes:
College tuition and fees: Your loans can pay for your tuition and fees, which are the standard college costs that come with enrolling in a program and attending classes.
Room and board: Student loans can pay for your living expenses and meals, including campus housing and school meal plans or off-campus apartments and groceries you purchase yourself.
Institutional fees: If your school charges institutional fees, such as lab fees or parking fees, you can use a portion of your loans to cover those education costs.
Books and supplies: According to The College Board, the average college student spends $1,240 on books and supplies per year. You can use your loans to pay for textbooks, notebooks, pens, book bags, and other school supplies.
Personal expenses: If you need personal items, such as ben linens for the dorm or a microwave for your off-campus apartment, you can use your loans to buy those things.
Equipment: You can use your loans to buy the equipment necessary for your schoolwork, such as a personal computer, software, or a camera if you enrolled in a photography class.
Dependent care expenses: If you have a child that needs care while you’re in school, your loans can pay for childcare.
Transportation: The College Board reported that transportation costs $1,230 per year at public universities and $1,060 at private universities, on average. You can use your loans to pay for a car, gas, or insurance. Or, you can use your loans to pay for a bus or train pass.
Other documented costs: If your school has additional required costs — such as school-mandated insurance — you can use your loans to pay for those expenses.
Study abroad expenses: If you decide to study in another country, you can use your loan to pay for your program and extra costs.
What You Shouldn’t Use Student Loans For
If you have student loan money left over after paying for your tuition, room and board, and other necessary supplies, don’t spend it on the following things:
Entertainment: Whether it’s tickets to the movies or a Netflix subscription, your student loans aren’t meant to pay for entertainment expenses.
Gym memberships: Instead of using your loans to pay for your gym membership, use the university facilities.
Travel: Don’t use your loans for vacations, including spring break.
Dining out: While student loans can be used to pay for your meals, don’t waste your money on restaurants or takeout food.
Why is using your student loans for these expenses such a bad idea? For one, you’re simply not allowed to do so in the loan terms. When you take out loans, you have to sign a promissory note or loan agreement. In that agreement, you have to certify that you will only use the loan for education-related expenses.
In the case of federal student loans, you have to make that certification under the penalty of perjury. While it’s unlikely that anyone will check your bank account for how you used your loans, if caught, there could be serious consequences.
But even if you’re not caught, it’s still not a good idea to use your loans for other expenses. You will need to start making loan payments — with interest — once you graduate. Borrowing beyond your financial need and spending money on splurges now means you’ll have to pay even more later on due to accrued interest. Also, there are federal loan limits on how much you can borrow, so you will need to turn to a private lender if you borrow too much too fast.
To cut down on interest charges, make a repayment plan for any student loan refunds you get right away instead of spending it on unnecessary purchases.
Rather than using your student loans for splurges — or racking up debt with personal loans or credit cards — consider picking up a part-time job or side hustle to earn extra money. You can use your income to pay for your other purchases, saving your student loans for essential expenses.
Private Student Loans
While federal loans can be useful tools, most federal student loans have limits on how much you can borrow each year. If you reach the annual or aggregate borrowing limit, you’ll have to find alternative financing to pay for the total cost of attendance.
Private student loans can be a great option to fill the gap not covered by federal student aid. If you have a strong credit history and credit score, you might qualify for a lower interest rate than you’d get with a federal loan. Over time, the lower rate can help you save a significant amount of money on monthly payments.
As a college student, you may not have established credit yet. If that’s the case, consider adding a cosigner to your loan application. A cosigner is a parent or relative with good credit and steady income who signs the loan application with you. If you fall behind on your payments, the cosigner has to make the payments, instead.
Adding a cosigner reduces the lender’s risk, so the lender is more likely to approve you for a loan if you have a cosigner on your application. And, adding a cosigner increases your chances of qualifying for a lower interest rate than if you applied on your own.
You can check your eligibility for a private student loan from Earnest in just two minutes, with no commitment or effect on your credit.