When your loan funds are disbursed, they are first sent to your school to cover tuition, fees, and housing expenses. Any extra funds will be given to you as a student loan refund, which can be used to cover other education-related costs.
Although you are not required to provide receipts to show how you spend the money, it is important to remember that you are obligated to use the loan funds for education-related expenses, as agreed upon in the loan terms. Keep in mind that you will eventually have to repay the loans, with interest, so it is wise to be careful about how you allocate your funds.
Five appropriate uses for student loans
1. Tuition and fees
Typically, the largest expense related to education is tuition and fees, which cover the basic costs of enrollment at your school. Tuition refers to the cost of your classes, while fees are the expenses directly associated with attendance, such as activity fees, library fees, parking permits, and technology fees.
The prices can vary significantly depending on the type of institution you attend, ranging from an average of approximately $10,940 per year at a public four-year college to over $39,000 per year at a private four-year college, according to a report by the College Board®.
2. Housing expenses
Whether you live in a dormitory or an off-campus apartment, you can use your student loans to cover housing costs and related expenses such as utilities. The cost of living can vary greatly depending on your location and whether you attend an urban or rural school, as well as whether you are enrolled in a public or private four-year college. According to the College Board, the average price of on-campus housing ranges from about $12,310 to $14,030.
If you plan to use your student loans for off-campus housing, it is important to know when your loan money will be disbursed to you. This will help you plan ahead and ensure that you have enough cash on hand to cover your rent and other bills.
Getting to and from school can be costly, but student loans can help you cover the expenses. You can use your student loan funds to pay for a parking pass, gas expenses, public transportation costs, or flights to and from school. To save money, you may consider alternative transportation options such as carpooling, biking, or using public transit.
Student loans can also be used to cover your meal plan and other food expenses during college. Many colleges offer different types of meal plans, catering to both commuter students and those living on campus full-time. Make sure to carefully examine the options available and choose the one that best suits your eating habits and budget.
5. Textbooks and supplies
When you are taking a full course load, each class may require multiple textbooks, which can be quite expensive. Since textbooks are essential for your education, you can use your student loans to purchase them. Additionally, you can use the funds to buy other required supplies and equipment for your classes. This may include computers, tablets, and other technological devices. To save money, consider renting books, buying used copies, or looking for refurbished electronics. You can also consult with your professors at the beginning of the term to see if earlier editions of textbooks are acceptable, as they may be more affordable.
Five inappropriate uses for student loans
1. Spring break
Student loans should not be used to fund vacations. If you cannot afford a trip without misusing your student loans, it is important to reconsider your spring break plans.
2. Eating out
While dining hall food can become monotonous, going out to restaurants regularly can quickly add up. Even inexpensive takeout can become costly when paid for with borrowed money and accumulating interest. If you have access to a kitchen, consider cooking some of your meals to add variety to your diet and save dining out for special occasions.
3. Dorm room accessories
While housing costs such as rent and electricity are necessary, purchasing decorations and accessories for your dorm room is not essential. Instead of spending money on these items, you can save by finding affordable ways to add personality to your room through do-it-yourself projects.
4. Purchasing a car
Just because you need transportation to and from campus does not mean you need to buy a new car. Stick with your current vehicle or explore alternative transportation options such as public transit or ridesharing services to minimize costs. If you must purchase a car while in college, consider buying a reliable used car instead of a brand new one.
5. Upgrading your wardrobe
Using student loan money to buy clothes is not a wise decision. If you are tired of your current wardrobe, organize a clothing swap with friends as a cost-effective way to refresh your style without straining your budget.
Just because certain expenses are not appropriate to be paid with student loans, it does not mean that you cannot treat yourself during college. If you desire new dorm room accessories, a meal at a nice restaurant, or other non-essential items, consider getting a part-time job or saving money from a summer job to cover those additional expenses. The more you can reduce your expenses, the less student loan money you will need to use. This will result in smaller loan payments and more money in your pocket after graduation.