When you take out federal student loans, the government expects you to use the proceeds on certain types of expenses. Tuition, fees, supplies and textbooks are among the expenses approved by the federal government, while things like vacations, clothing and some other personal expenses are prohibited.
While private lenders can vary in what they allow students to use loan funds to cover, the restrictions typically line up with the list for federal loans.
Eligible Expenses for Federal Student Loans
The Office of Federal Student Aid states that college students must use federal student loans only for approved expenses. In fact, when you sign the Free Application for Federal Student Aid (FAFSA), you certify that you'll only use the money for educational purposes.
According to the agency, the following are approved:
- Tuition and fees
- Room and board
- Other supplies and equipment
- Costs related to studying abroad
- Transportation to and from school
- Child care expenses
- Disability expenses
Which Expenses Are Ineligible for Federal Student Loan Funds?
Federal student loans are meant to cover educational expenses, which means you're not supposed to use the money for other personal expenses, such as travel, clothing, video games, business expenses, a down payment on a home or expensive meals and drinks.
There are some caveats within some of the approved categories as well. For example, if you already own a car, you can use student loan money to pay for gas and any other expenses required to operate and maintain the vehicle. But you can't use the money you've borrowed to purchase a vehicle.
Additionally, groceries are included in the room and board category, but that may not extend to going out for drinks with friends on the weekend.
You may be tempted to use your federal student loans for unapproved expenses because it's difficult for the government to determine how you used the money. But because you signed an agreement saying that you only used the money to pay for your education, you risk the possibility that the Department of Education cancels the loan agreement and demands immediate repayment.
What Can You Use Private Student Loans For?
Private student loan terms are dictated by individual lenders, so there may be some differences between institutions. For the most part, though, private lenders typically follow the Department of Education's lead on approved expenses.
If you have a question about whether an expense is approved or not, contact your lender or loan servicer to find out.
How to Pay for Other College Expenses
Federal student loans aren't designed for noneducational expenses, but that doesn't mean you have to go without. Here are some ways you can cover your other expenses that aren't on the approved list:
- Work: At a minimum, you might consider working full time during the summer months, so you'll have enough money to pay for your other living expenses. Depending on how much you earn, you may also be able to cover a good chunk of your college costs. If you can, you may also work part time during the school year—just make sure your job doesn't interfere with your coursework.
- Allowances: If your parents are willing and able to give you an allowance, you can use that money to help cover some of your expenses that aren't covered by your student loans.
- Scholarships and grants: Scholarships and grants offered by your school and the government are typically applied directly to your tuition and fees. But if you have any money left over, you may be able to use that money for other expenses. Just be sure to read the agreement. Additionally, you can use scholarship databases like Scholarships.com and Fastweb to obtain scholarships and grants from private organizations. These typically have fewer restrictions than student loans.
A student credit card can be a great way to start building your credit history while you're still in school as long as you're able to use it responsibly and pay on time and in full every month. Also, while personal loans can be used for just about anything, they can also be costly, especially if you haven't had the chance to build your credit history yet.
To make sure your finances are under control while you're in school, be sure to create a budget and stick to it every month. Now is the perfect time to experiment and see which budgeting method works for you.
As you continue on your financial journey, make sure to keep an eye on your credit. You can make a free Experian account to gain access to your Experian credit report and credit score based on Experian data.