What Can Student Loans Be Used For?

College is a significant investment. A single year at a public, four-year university for an in-state student costs $9,410. Opt for a private school, and that number jumps to $32,410.  But, those numbers only include tuition; you’ll also have to factor in for room and board, textbooks, and other fees.

With such high costs, some families rely on student loans to help pay for college and their living expenses. But when it comes to student loans, it can be tough to figure out what student loans can be used for and what they can’t.

Student loans should only be used for education-related expenses.

Below, we break down the possible uses for student loans and what you should avoid doing.

What can you spend student loans on?

Student loans should be used to cover your cost of attendance. That includes:

  1. Tuition: Use your loans to pay for the semester’s tuition.
  2. Textbooks: Textbooks can easily cost hundreds or even thousands each year, so it’s a good idea to use student loans to cover the costs.
  3. Supplies and required equipment: You can use your loan to cover the purchase of a computer or other required supplies and fees.
  4. Room and board: Your loans can be used to pay for your dorm room, meal plan, or apartment rental.
  5. Transportation: If you’re commuting to school, you can use the loans to cover the cost of gas or a bus pass.

Those are the eligible expenses, as defined by the government in the Higher Education Act of 1965. However, how student loans actually work can mean there’s more grey areas.

Typically when you take out a student loan, it goes directly to the school to cover set expenses like tuition, fees, and room and board. If there’s any money left over to help cover extra costs such as your living expenses and books, it’s sent to you as a check, direct deposit into your bank account, or even a credit to your student account, etc. Be sure to check with your school to understand their refund method and timing since each school can be different.

Once the money is in your bank account, the money is there for you to use as you see fit.

But can you use student loans on anything?

While technically you can use the student loans as you wish, making non-education-related purchases with your loans is a recipe for disaster.

What you shouldn’t spend student loans on

Figuring out what you can and can’t use student loans for can be difficult. If you’re not sure, check out this list of seven things you should avoid using your student loans for:

  1. Travel: While you can use your student loans for transportation to and from school, using it for more general travel — like Spring Break — is a bad idea.
  2. Debt: Because student loans tend to have lower interest rates than other forms of debt, many people are tempted to use them to pay off credit card debt or personal loans. But, doing so doesn’t solve the problem. It just moves the debt around.
  3. Clothes: Avoid shopping trips and splurges on clothing and accessories.
  4. Restaurants: While eligible expenses include meals, that doesn’t mean you can use it to finance nights out at restaurants and bars.
  5. Vehicles: Using a student loan to buy a car will be likely far more expensive than if you financed the car with a traditional car loan or — even better — bought a cheap used car in cash.
  6. Devices: Although you may need a computer for school, you likely don’t need the latest tablet or smartphone, too.
  7. Business expenses: While launching a side hustle or business while in school is a great idea, using your student loans to finance the business can be costly.

Using your student loan for non-qualified education expenses will cost you over time. If you do need to borrow money to pay for college, borrowing more to cover extra expenses like entertainment or travel will only add to your debt burden.

That might not sound like a big deal now. However, consider that many people take 20 or even 25 years to pay off their loans. Thanks to interest, you could pay back thousands more than you originally borrowed.

If, after paying for your essential expenses, you have money left over, it’s wise to use that money to repay a portion of your student loans.

How to save money while in college

While it may seem like a good idea to use your student loans for other purchases, try to avoid doing so to ensure you’re in good financial shape for the future.

If you need extra money, consider getting a part-time job. You can use your income to pay for meals out, Spring Break, and other fun expenses.

If you’re looking to save money, a good way to reduce how much student loan debt you need is to apply for grants and scholarships. You can apply for a chance to win a scholarship through our $1,000 Monthly Scholarship Sweepstakes.


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