What Can I Pay for with Student Loan Money?

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Kristen Kuchar

By Kristen Kuchar

December 12, 2019

If you have borrowed student loans, you may be wondering what exactly you can use that student loan money to pay for, besides tuition and fees. Can you pay for living expenses with student loans? Can you buy a new car with student loan money? Can you use student loan funds to pay for rent or buy a new computer? Here’s what you need to know about what you can do with student loan money. 

The Free Application for Federal Student Aid (FAFSA) includes a statement of educational purpose, in which the student certifies that he or she will use student financial aid “only to pay the cost of attending an institution of higher education.”

Eligible Expenses

The cost of attendance, as defined in the Higher Education Act of 1965 [20 USC 1087ll], includes both college costs and certain living expenses. The college financial aid office will specify the eligible expenses and their amounts in one or more student budgets, based on whether the student is living on campus, off campus or with their parents. 

What college costs can you pay for with student loans?

  • Tuition and fees

  • Textbooks and other books required for a course

  • School supplies and equipment

  • Any other course materials

  • Professional licensing and certification fees

  • Study abroad costs

  • A personal computer, peripherals, software and Internet access

  • Loan fees, including origination fees and guarantee fees 


What living expenses can you pay for with student loans?

  • Costs of living in the dorm or renting an apartment (if you live off campus)

  • Utilities, such as electric, gas and water

  • Insurance, such as renter’s insurance, health insurance and auto insurance

  • Food

  • Transportation and commuting expenses, such as gas, a parking pass, bus pass

  • Health care, including medications and any out-of-pocket costs for doctor visits

  • Essential toiletries, such as toothpaste, soap, shampoo and deodorant 

  • Housing supplies, such as towels

  • Child care for dependents


What If the Allowances Aren’t Enough?

The allowances in the student budget may not be realistic, especially the allowances for textbooks and transportation. The cost of a single physics textbook, for example, may exceed the college’s book allowance. Transportation costs can vary, depending on the distance the student must travel to get to campus and the cost of parking and tolls.

Thus, it is important for the student to keep receipts and use them to ask the financial aid office to base the allowances on the student’s actual expenses. When a student appeals for more financial aid, the financial aid office has the option of making adjustments to the cost of attendance, not just adjustments to data elements on the FAFSA. 

In addition, there are certain eligible expenses that are not included in the standard student budgets because they don’t apply to all students. These include allowances for dependent care costs, disability-related expenses and the extra costs associated with study abroad programs and cooperative education programs. They also include the cost of obtaining professional credentials for programs that require professional licensing or certification. If these expenses apply to the student, the student should ask the college financial aid office to add them to the student’s cost of attendance. 

Transportation Allowance

The transportation allowance is intended to cover two types of travel expenses.

  • Daily commute to and from campus for students who live off-campus

  • Travel to and from campus at the beginning and end of the academic year for out-of-state students. This can include the cost of roundtrip airfare or bus or train tickets.

For students who live off campus, many colleges will multiply the distance from campus by the IRS mileage rate. The IRS mileage rate is based on the cost of gas, oil, tires, maintenance, repairs, insurance, registration, licenses and depreciation. It does not include the cost of parking and tolls.

Some colleges will base the transportation allowance on the cost of a bus pass instead of the IRS mileage rate.

The transportation allowance is typically going to be less than a thousand dollars.

Ineligible Expenses

Generally, the focus of the student budget is on the incremental cost of enrolling in college. 

The transportation allowance, for example, is intended to cover the cost of commuting to and from the college campus, not the cost of buying a car. The college financial aid office will not increase the transportation allowance so that the student can buy a car with student loan money.

The cost of attendance is not intended to cover the cost of eating out, paid entertainment, alcohol, vacations, tithing, gifts for friends and family, gadgets and a luxury apartment.

The Gray Area of Misusing Student Loan Funds

There are certain categories where there can be confusion with when deciding what you can and can’t pay for with student loans. For example, food is obviously essential in your life, and you can use student loan money to pay for groceries. However, constantly going out to eat at restaurants and regularly getting pizza delivered for all of your roommates would be a no-no. 

While you can use student loans to pay for studying abroad, you shouldn’t use your loans for jetting off to Cancun for Spring Break. You might need to buy a new outfit for an internship interview, but you shouldn’t use student loan money to fund a new wardrobe and buy expensive clothes. 

Remember, every dollar you borrow will cost about two dollars by the time you repay the debt. So, live like a student while you’re in college, so you don’t have to live like a student after you graduate. 

Once you have graduated, you will much rather be putting your hard-earned money towards saving for your retirement or enjoying your present life, not paying for your past mistakes. Save the vacations, new clothes and restaurants for when you can actually afford them. Instead, stick to a budget, get a part-time job while you’re in school and spend as little as possible. 

A good place to start:

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