Can You Take Out A Student Loan For Living Expenses?
Taking out student loans is a rite of passage for many college students. Not only must college students use loan funds to pay for tuition and fees, they often need to use those funds to pay for other items like room and board. If you’re considering student loans, you may be asking yourself questions like, ‘what can student loans be used for?’ or, ‘can you take out a student loan for living expenses?’ This post aims to answer all those questions.
You can use student loan money to pay for living expenses, but it comes with a significant catch – it adds to your balance, thus increasing your indebtedness once it is time to make payments. If you’ve received a refund after paying for tuition and fees and are wondering what can student loans be used for, here are some things to keep in mind.
How to best use student loans for living expenses
When you take out a student loan, it’s understood you are to use the loan money for tuition and fees, along with room and board. Many lenders realize you may need to use some of that loan money to pay for other necessary expenses, though, it’s understood when you take out those loans they are to be used largely for attending school and expenses related to that experience.
You may find you have student loan money left over after you pay for tuition, fees, and room and board – assuming you live on campus. You may think that’s money for you to do with as you please. Now, you won’t get in trouble by spending that money frivolously, but if you’re asking yourself ‘can you take out a student loan for living expenses?’ you might not understand the nature of your loans. Spending leftover money on living expenses, particularly frivolous ones, is not the wisest way to spend leftover student loan money.
Instead, consider some of these sound uses for student loans.
Living off-campus: Payment for room and board comes out of your student loan disbursement. If you live off-campus, you are on your own to pay for housing.
It is okay to use student loan money to pay for off-campus housing, but be wise in choosing your housing situation. It’s best to have at least one roommate, if not more, and to choose a modest apartment. This will ensure you have what you need without spending too much of your student loan refund.
Finally, make sure to live close to campus to remove the need for a car so you can walk or bike to classes, as this will help keep transportation costs down.
Food: Like housing, you’re on your own with food when you live off-campus. If you are new to cooking, don’t use that as an excuse to eat out a lot as it only chews up your refund.
Instead, keep your food costs down with simple recipes. A crockpot, for instance, can be a great, cheap investment that will simplify a lot of your cooking needs. If you have a roommate, make sure to share costs with them to keep costs down for both of you.
Books and supplies: You obviously will need to purchase books for class, and they are a justifiable use of student loan money. Shopping at the local bookstore is one option, but you may find cheaper options online. Make sure to comparison shop to get the best price possible. Additionally, if you need tutoring, this can be a good use of student loan funds.
A reliable computer: A reliable laptop is a necessity for most college students. If you don’t already have a laptop of your own, it’s understandable to use excess student loan funds for such a purchase. Just make sure to purchase what you need and don’t spend up to get a top of the line machine.
Your school may also have an arrangement with certain manufacturers to offer discounted prices; check out those options to get a lower price.
With some purposeful spending, you can have what you need without needlessly growing your student loan indebtedness.
What not to spend your student loan refund on
Student loan debt is a well-documented problem in our society. With the average 2016 graduate carrying over $37,000 in student loan debt, it’s a problem many recent and soon-to-be graduates face. Abusing excess student loan money will only make the situation worse.
When you receive extra student loan money, it’s easy to be tempted to spend that money on things you have always wanted, or other fun experiences. While you can use the money as you please, it will only cost you more in the long-term as interest grows the indebtedness even larger.
With that in mind, below are certain living expenses you should not use student loans on:
- Alcohol – It may be a rite of passage for many college students, but it’s a waste of money to take on debt to finance late-night drinking.
- Travel – It’s fine to use student loan money to travel back home if you live far from your parents. On the other hand, using student loan money to fund vacations or spring break trips is not wise.
- Furniture for your apartment – You may not be able to find a furnished apartment if you live off-campus. Instead of using student loan money to buy nice, new furniture, you want to be as frugal as possible. Look for furniture at garage sales, thrift stores, or even in your parent’s house.
- Other big purchases – There are several other large purchases you may want to make with your student loan money – from nice clothes to a car upgrade. Unless you are in desperate need, it’s best not to use excess funds for such a purchase.
Again, it’s tempting to use student loan money for fun things. Don’t give into that temptation as it will only grow your debt levels. This can be particularly problematic if you have high-interest private loans or unsubsidized loans that cause debt amounts owed to swell.
One great way to afford some niceties without taking on debt is getting a part-time job. You can use a portion of each paycheck for things you want without increasing your debt.
Still have leftover funds?
In reality, it’s likely you will receive a refund of excess student loan money. How you handle those funds can set you up for success in both the short and long-term, if handled wisely.
Here are some of the best options for your refund:
Give the money back: Just because you received the refund doesn’t mean you have to use it. In fact, you have up to 120 days to return federal loan money to your financial aid department, without penalty. If you are past that time, you can still return the money to repay part of the loan.
Put the money in a savings account: This can be particularly helpful if you have no savings, and no job to fall back on. You may not want to do this with all of your refund, but $500 or $1,000 should be enough.
Save for an upcoming expense: Do you plan on buying a laptop, or some other large expense for school in the near future? You may want to save it to help defray the cost.
Pay off high-interest debt: If you have credit card debt or other high-interest debt, you may want to use your refund to pay the debt down. Make sure not to go back into debt again as it will only increase the debt load on both.
As you can see, there are many options of what to do with excess student loan money. The best option is to spend as little as possible. The last thing you want to do is foolishly spend the money, leading to increased debt. If you manage the funds wisely, you can save for a rainy day, save money on interest, or even lower your total overall indebtedness.
Can you take out a student loan for living expenses? Yes, you can, but do so wisely to avoid lingering student loan debt issues that can impact you for years to come.