Can You Use Student Loans For Living Expenses?

For the past seven years, Kat has been helping people make the best financial decisions for their unique situations, whether they're looking for the right insurance policies or trying to pay down debt. Kat has expertise in insurance and student loans.

For the past seven years, Kat has been helping people make the best financial decisions for their unique situations, whether they're looking for the right insurance policies or trying to pay down debt. Kat has expertise in insurance and student loans.

For the past seven years, Kat has been helping people make the best financial decisions for their unique situations, whether they're looking for the right insurance policies or trying to pay down debt. Kat has expertise in insurance and student loans.

For the past seven years, Kat has been helping people make the best financial decisions for their unique situations, whether they're looking for the right insurance policies or trying to pay down debt. Kat has expertise in insurance and student loans.

Caroline Basile is Forbes Advisor’s student loans and mortgages deputy editor. With experience in both the mortgage industry and as a journalist, she was previously an editor with HousingWire, where she produced daily news and feature stories. She ho.

Caroline Basile is Forbes Advisor’s student loans and mortgages deputy editor. With experience in both the mortgage industry and as a journalist, she was previously an editor with HousingWire, where she produced daily news and feature stories. She ho.

Caroline Basile is Forbes Advisor’s student loans and mortgages deputy editor. With experience in both the mortgage industry and as a journalist, she was previously an editor with HousingWire, where she produced daily news and feature stories. She ho.

Caroline Basile is Forbes Advisor’s student loans and mortgages deputy editor. With experience in both the mortgage industry and as a journalist, she was previously an editor with HousingWire, where she produced daily news and feature stories. She ho.

| Mortgages and Student Loans Deputy Editor

Updated: Oct 13, 2023, 7:25am

Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.

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As a college student, your school’s tuition and fees are just a portion of your total education costs. According to The College Board, living expenses—including rent, meals and transportation—cost undergraduate students in 2019-20 around $17,000 per year, on average.

Most students and families don’t have enough money saved to pay for all of their college expenses, so you may need to use federal or private student loans to cover the cost instead. However, there are some significant restrictions and drawbacks to keep in mind before you decide to use your student loans for living expenses.

Can You Pay for Living Expenses With Student Loans?

Tuition and fees make up just a small percentage of what you’ll pay for college. That’s why schools show their total cost of attendance (COA): an estimate of what students spend on tuition, fees, room and board, textbooks, supplies, transportation and other essential living expenses.

How the Cost of Attendance is Determined

The COA is determined by the individual school, not the federal government. The COA will vary based on the college you attend and its location. For example, a college in New York, which has a very high cost of living, will have a higher COA than a school in Mississippi—the state with the lowest cost of living in the country.

Schools have their own formulas for calculating the COA, but many use an average of what students spend to determine the typical cost.

The school-determined COA is generally the maximum you can receive in financial aid, including grants, scholarships and student loans. Both the federal government and private student loan lenders use the COA to determine your maximum aid amount.

Authorized Uses of Student Loans for Living Expenses

When you take out a student loan, you have to sign a loan agreement that states the loan’s terms, including its interest rate. In the agreement, it also lists authorized uses of the money. Besides tuition, the following living expenses count as authorized uses of student loans:

• Rent. Student loans can be used to pay for your housing. You can use borrowed money to pay for a dorm room, but you can also use student loans for living expenses off campus, such as getting an apartment with friends.
• Meals. The COA includes an allowance to cover your meals. Whether you sign up for the college meal plan or purchase your own groceries, you can use your loans to pay for food.
• Personal computer. You can rent or purchase a personal computer with student loans to help you complete your classwork.
• Supplies. If you need additional supplies, such as notebooks, pens or software, you can use your loans to purchase those materials.
• Childcare or dependent care. Student loans can be used to pay for childcare, such as hiring a babysitter for when you attend class.
• Transportation. You can use your loans to pay for the maintenance of your car, fuel or bus and taxi fares.

Costs to Avoid Paying for With Student Loans

You can use federal and private student loans to cover some of your costs while in school. However, students should be careful what types of debt they take on for school items, often because federal student loans are relatively easy to get. You can even qualify for student loans for living expenses with bad credit, since most federal loans don’t require a credit check.

Taking out loans when you have poor credit can be tempting. But using student loans for expenses like the following can be a costly mistake:

• Purchasing a vehicle. While student loans can be used for transportation, the rules state that they should be used for maintenance, fuel or fares. They’re not intended to be used to purchase a car or for payments on an auto loan.
• Travel. You can use a portion of your loans for legitimate study abroad programs, but you should avoid using them to pay for nonessential trips, like a spring break vacation.
• Dining out. Under the cost of attendance, the allocation for meals is meant to be a reasonable amount for a meal plan or groceries. It’s not designed to cover frequent deliveries or restaurant meals.

In general, you should think about your student loans as a financing option to pay for essential expenses and the basics. You can use your loans to cover food, housing and transportation, but at a modest level.

How To Use Student Loans for Living Expenses

After your cost of attendance is paid, any leftover funds are refunded directly to you. Once you get your refund, you can use that money to pay for living expenses, like rent, food, living supplies and more. Your school might limit how much you can spend on each expense, so talk to your financial aid department if you’re worried about some of your expenses.

Remember that you’ll pay interest on the amount you borrow. Avoid taking out more than you need by only paying for essentials. Everyone has different needs when it comes to living expenses, but try not to spend more than necessary.

Why It’s Key to Keep Student Loan Spending Low

When you get your financial aid award letter, you may be offered more student loans than you really need. Or you may find that you have extra money after paying your regular bills. However, you should only use the minimum necessary to pay for school due to the following reasons:

1. Hitting Loan Maximums

There are limits on how much you can borrow in federal student loans annually and over your lifetime. If you use more money than you need during your freshman or sophomore year, you may not be able to borrow more money in your junior or senior year. If you decide to pursue a graduate degree, you may not be eligible for certain types of graduate student loans for living expenses.

Borrow the least amount necessary to ensure you have financial aid for your entire education. Otherwise, you may have to resort to private student loans, which tend to have higher rates and stricter repayment terms.

2. Penalties

Using student loans for nonessential purposes can be risky. Particularly with federal student loans, taking out more than you can afford can have significant consequences if you fall behind on your payments:

• Bankruptcy discharge is rare. With other forms of debt, such as car loans or credit card balances, you can declare bankruptcy to eliminate your debt and start over. However, federal student loans are notoriously difficult to discharge in bankruptcy.
• Interest. If you use student loans for luxuries, like dining in restaurants or travel, be aware that you’ll pay interest on the money you borrow. Most borrowers take 10 years or more to repay their loans, so you could end up paying thousands more than you initially borrowed.
• Wage garnishment. If you default on your federal student loans, your loan servicer can garnish your wages, taking money directly from your paycheck.
• Treasury offsets. Federal loan servicers can also seize your tax refund through Treasury offsets.
• Ruined credit: Missing payments and defaulting on your student loans can seriously damage your credit, making it difficult to qualify for a car loan, home mortgage or even get approved to lease an apartment.

How to Set a Budget for Living Expenses as a College Student

As a college student, it’s important to develop a budget before school starts to manage your finances. To create a budget, evaluate how much money you have to spend from scholarships, grants, work-study programs, savings and family contributions. Then, deduct your school’s total cost of attendance. The resulting number is how much you’ll need to borrow in student loans.

While you can use student loans for living expenses, it’s wise to limit your spending to minimize your student loan debt. Sticking to a budget while you’re in school will make repaying your debt easier after graduation and help you achieve your goals.

Alternatives To Using Student Loans for Living Expenses

Instead of borrowing more to pay for living expenses, you can find other ways to pay for your needs, like:

• Applying for scholarships and grants. Scholarships tend to be merit-based while grants are need-based. The more free money you get through scholarships and grants, the less you need to repay once you leave school.
• Work. Getting a job while in college can help you pay for living expenses. You’ll need to find a job that’s flexible with your class and study schedule but also find time to work enough to pay your bills.
• Ask for help. If your relatives have the means, you might want to ask them to cover some of the costs while you’re in school. This gives you more time to devote to your studies without borrowing money through student loans. Not everyone has the cash on hand for this, so if you know someone willing to help, consider asking.