How to Use Student Loans for Living Expenses

You can use student loans to pay for living expenses, including rent, utilities, and groceries, as well as those costs that are necessary for your personal needs. There are limits, however, to what student loans can legally purchase.

*These rules apply to traditional students enrolled half-time or more. Students enrolled for less than half-time have alternative allowances.

Acceptable Expenses for Student Loans

Any expense that is considered part of the Cost of Attendance (COA) is allowable. You school’s financial aid office determines its own COA, which determines your individual loan disbursement.

Though your school receives your student loans directly from the lender, any funds left over are disbursed to you. You then have the choice to return those funds (thus reducing your principal balance) or use those funds for other allowable expenses.

The Office of Federal Student Aid strongly recommends that students borrow only what they need to avoid racking up unnecessary debt. Use loans only after you have explored all education funding options, such as scholarships. Qualify for more and better scholarships when you improve your SAT score with an SAT prep course.

Tuition & Supplies

Tuition and fees, such as registration and graduation fees. Also allowable: required texts (whether in print or online, purchased or rented). Books that are related to your major and supplies, such as a computer, printer, and ink cartridges.

Also, costs of testing, licenses, and certificates related to your major are allowed one (1) time per student per eligible academic program. For example, a law school graduate may use student loans to pay fees for their bar exam one (1) time. In some cases, medical school graduates may be able to use student loans to pay for costs incurred for their residency interview.

Any other program requirements for which the student incurs costs may be allowable. Some requirements may be at the discretion of your school. Contact your financial aid office to learn all your options.

Room & Board

Any fees for on-campus housing go directly to your school, but you can use student loans to pay for off-campus housing. Housing costs may refer to rent, utilities, and renter’s insurance. Also included are household necessities, such as dishes, bedsheets, and cooking devices.

Any living expenses related to a disability may be considered housing costs, including special services and personal assistance. See the Federal Student Aid Handbook for a full list of conditions that qualify as disabilities.^[1]

In addition to meal plans approved by your school, you may use student loans to pay for groceries as part of the cost of your room and board. This does not include food purchased from any restaurant or deli that operates within a grocery store; these are considered take-out.

Personal Care Items

Day-to-day living costs include personal hygiene products, such as toiletries, and personal care necessities. Medicine is considered a necessity; this includes non-prescription or over-the-counter drugs, such as aspirin or cough medicine.

In addition to prescription medication, student loans can pay for any personal care costs related to a disability, including routine purchases of medical equipment and supplies (if other agencies do not provide them). Major, high-cost medical equipment is not allowable.

Commute Expenses

Commute expenses include your transportation costs, such as bus or train passes, to and from school. Fuel for a personal vehicle as well as some vehicle maintenance is allowable.

Also included in commute expenses are transportation costs related to a disability. Some schools offer special shuttle service for their students with disabilities.

Care for Dependents

Care for dependents is usually not factored into your COA unless you notify your school’s financial aid office.

Eligible dependents include any children or adults under your guardianship who require care while you commute and attend classes, study, perform field work, or intern. The required dependent care could include a babysitter, nanny, or daycare. Preschool, after-school programs, or developmental care may be included – consult with your school’s financial aid office.

Educational Employment

Some academic institutions offer real-world experience through cooperative education programs. Participants may use student loans to pay for any expenses incurred during the course of their cooperative employment.

For example, an archaeology student may apply to work at a dig site several hundred miles from where she attends school. Should she obtain employment through a cooperative education program, she may use her student loans to pay for transportation, supplies, room & board, and other costs related to her employment at the dig site.

Study Abroad

Study abroad programs can be costly; they require transportation abd room & board on top of instructional costs. When you participate in a study abroad program, you may use your student loans to pay necessary costs.

Such costs may include field trips or day trips through the program. Beware, however, that unauthorized or independent trips do not qualify; these are considered vacations, and you may not pay for them with student loan dollars.

Unacceptable Expenses for Student Loans

Don’t take out more money in loans than you need. Always avoid creating more debt by forgoing certain conveniences or finding a source of income. Consider these options before using more loan funds than you need.

There are major consequences for using your student loans for unauthorized purchases. Some lenders require immediate repayment of the full loan balance, including any portion you have already spent. Inability to pay can negatively impact your credit report. It may also have an impact on your other loans and future loan opportunities.

No Other Debts

Many students use credit cards to build credit and cover emergency costs while they’re in school. You may not, however, use student loans to pay off credit card debt or any other debts. This includes personal debts, mortgages, payday loans, or title loans.

Also off-limits are anyone else’s education costs. There may be an exception if the costs are related to a dependent’s care. For example, if you send your toddler to pre-school while you attend classes, the costs of pre-school may be allowable. Consult your school’s financial aid office to learn more about your options.

No Real Estate

You may use student loans to pay your rent but not to purchase or maintain a home or other real estate property. This includes, but is not limited to, a down payment, mortgage payments, and rent-to-own.

Purchase of a non-traditional home is also not allowed. Houseboats, tiny homes, yurts, earth ships, and the like are all ineligible for purchase with student loan dollars.

No Dining Out

Whether you grab a sandwich for lunch from a local café or order a pizza at 2am, food purchased from a restaurant is generally off-limits. It doesn’t matter if you eat in the dining room or take your meal home.

There may be an exception for meals purchased as part of disability services. Other possible exceptions include off-campus meal plans approved by your school; some schools even partner with third-party food ordering & delivery apps that students can download to their mobile device and link with a school account.^[2]

No Entertainment

You may not use your student loan dollars to purchase streaming subscriptions or home entertainment electronics, such as media projectors. Movie tickets are also not allowed, even if purchased at a school-owned theater. Likewise, live concerts and performances presented by your school are not considered educational expenses unless they are part of your approved program coursework.

Passes to festivals, art shows, and museum exhibits are all considered entertainment and do not qualify for student loan purchase. Again, there may be an exception if the event is part of your approved coursework. Confirm with your school’s financial aid office if you are unsure.

No Vehicle Purchase

You may not use your student loan dollars to purchase a personal vehicle. This is true even if your school is in a rural area with few public transportation options and even if you intend to only use the vehicle to commute to school.

In addition to motor vehicles, human-powered vehicles, such as bicycles, are also not approved for purchase with student loans. Furthermore, aside from general maintenance, no major vehicle repairs are allowed.

No Business Expenses

No small business purchases. Even if you are a business major or your studies are focused on business, small business expenses are not legitimate student loan purchases.

The only possible exception to this rule is if the small business is part of your approved coursework. For example, if part of your MBA program includes founding a limited liability company, you may be able to use student loans to pay corporate filing fees.

No Vacations

Do not use student loans for vacations. Though you may consider a vacation to be an essential mental health break, you may not use your student loans to pay for any costs related to a vacation, including transportation, hotels and short-term stays, or food.

COA for Alternative Students

The COA listed on school websites is usually for traditional, full-time students. Some non-traditional students have a different set of costs that are eligible for purchase using student loans.

Each student, traditional and non-traditional, has their individual needs, as well. Individual institutions may include special allowances in their COA, sometimes on a case-by-case basis; this is yet another reason why it’s important to communicate with your school’s financial aid office and ensure you understand all of your available options.

Less-Than-Half-Time Students

Any time you’re enrolled for less than what your school considers half-time, your cost of attendance decreases significantly, as does the variety of expenses you pay for with student loan dollars.

As a less-than-half-time student, you may only use student loans to pay for:

• Tuition & fees.
• Books & supplies.
• Room & board.†
• Transportation.
• Care for dependents.

†For a limited duration, usually up to three (3) semesters.

Correspondance Students

Correspondance students enrolled in either an associate’s, bachelor’s, or graduate-degree-granting program are eligible for federal student loans. These students may only use these loans to cover tuition & fees, including the cost of books & supplies.

As a correspondant student, your COA may include the cost of residential training (such as travel, supplies, room & board), but only if your program requires such a training period.

Incarcerated Students

Incarcerated students are not eligible for Title IV loans but may be eligible for Pell grants if the student is not in a federal or state penitentiary.

Regardless, incarcerated students who receive student loans may only use them to pay for tuition and fees as well as required books and supplies.

Special Exceptions & Circumstances

Your school’s financial aid office has the authority to adjusted your COA to allow for special circumstances. Contact your financial aid office to discuss your options.

If you are part of a special program that waives certain costs, such as the cost of room & board, your COA may be adjusted accordingly.

Periods of Non-Attendance

Periods during which you are not enrolled in coursework may not count toward instructional time for the term or program. Any separate credits earned during non-attendance do not count toward enrollment status.

In other words, if you complete coursework that is not credited as part of the program for which your student loan is approved, you may not use your student loans to pay for costs associated with the uncredited coursework, such as books and supplies. Similarly, coursework completed at another, unapproved institution may not be funded by student loans.

Sources

1. U.S. Department of Education (ED) Office of Federal Student Aid (OFSA), 2020-2021 Federal Student Aid Handbook: Cost of Attendance (Budget)
2. University of Iowa, University Housing and Dining: Meal Plans
3. ED OFSA, Financial Aid Toolkit: Financial Literacy Guidance from Federal Student Aid
4. Consumer Financial Protection Bureau, Your Financial Path to Graduation