Where To Spend Student Loan Funds

What Can a Student Loan Be Used For? – Detailed Guide

Student loans can take the financial burden of having to cover education expenses when you do not have the financial means. These loans make all the difference to several students’ lives each year by providing them with the finances required to advance their education.

When you have been approved for a student loan, you must spend the loan funds carefully. After all, the purpose of student loans is to ensure a student has what they need to advance their education.

You should not use student loan money for expenses that do not contribute to furthering your education. You may be wondering exactly which costs you can cover using your student loan money. Luckily, this article will highlight everything you need to know about student loans and what they can be used for.

What Can I Spend Student Loan Funds On?

Loan agreements make it quite clear that students should only spend loan funds on specific educational-related expenses. However, quite a few students still misuse student loans to pay for personal expenses unrelated to furthering their education.

As this goes against the loan agreement, there can be serious consequences that these students will have to face. This is why it is important to ensure you are absolutely clear about the expenses you are permitted to cover using your student loan money.

Qualified Expenses Using Student Loan Funds

To ensure your student does not run into any trouble and follows your loan agreement, take a close look at the agreement.

To make this process a bit easier, here is a list of qualified educational expenses that are generally acceptable in most loan agreements:

  • Tuition
  • Computer or laptop
  • Books relevant to your academic course
  • School supplies, including stationery, notebooks, etc.
  • Living expenses, including college board or rent
  • Housing utilities such as appliances, cleaning supplies, etc.
  • Transportation expenses include bus, train tickets, and gas
  • Certain personal expenses like groceries
  • Dependent child care expenses

Despite almost all loan companies accepting these expenses in most loan agreements, you must conduct your own research to double-check which items you can spend loan money on.

Invalid Expenses Using Student Loan Funds

The acceptable items for students to spend loan money on need to be kept in mind when entering into a loan agreement. Similarly, it is just as important to consider which expenses you cannot cover using student loan money. A few of the items that you should forbid yourself from student loan money on include:

  • Personal items
  • Personal travel expenses
  • Business expenses
  • Extravagant meals and drink
  • Down payment for a house
  • Other people’s expenses
  • Expensive electronics and appliances
  • Entertainment subscriptions
  • A motor vehicle or bicycle
  • Vacation expenses
  • Debt repayment, including other personal loans, credit cards, etc.

What To Do With Excess Student Loan Funds

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What if you arrive at the end of your academic year and are left with a bit of unused student loan money that you do not know what to do with? Try one of the solutions listed below. Here are a few recommended actions to handle any remaining funds from the student loans:

1. Start Paying Off Your Student Loan

One of the best ways to spend any leftover student loan money is to start paying off your student loan in advance. This can be extremely beneficial for you in the future since you will not need to pay back the entire student loan in a limited amount of time.

The interest rate on a student loan will also be much lower now than it will be in a few years. This means the amount of money you owe back now will be much less compared to what you will owe in a few years because of interest.

2. Cover The Cost Of Other School Expenses

Another smart way to spend excess student loan money is to cover the costs of other school expenses. This can include school expenses for the next year, meaning you will not need as much student loan money for the next year. This will help reduce the cost of your loan repayment in the future.

3. Send The Money Back

You can always send this money back if you are unsure what to do with the excess student loan funds. Not spending loan money and returning it will also decrease the cost of your loan repayment amount in the future.

About Federal Student Loans

Federal student loans or federal student aid are loans that are offered by the federal government. These loans are created to provide students who do not have the financial resources to cover educational expenses with the required funds for these expenses.

Student loans provide a way for students to gain access to further their education which increases their chances of getting a better job.

Each student loan will vary depending on the amount awarded to the student, the interest placed on the loan, and the timeline for the student to pay the loan back. The conditions of the money on each loan may also vary, so it is crucial to read the terms and conditions.

Entering into a loan agreement is a serious commitment. Therefore, it is important to know the various types of financial aid.

This will help you decide which type of loan will best suit your needs as a student. The four types of federal student loans include:

  • Direct Consolidation loans – this type allows students to combine various federal student loans and use them to pay expenses via one loan servicer.
  • Direct PLUS loans – the loan funds in this type of loan can cover the other expenses that the primary loan you have do not cover. This loan caters to graduate students, undergraduate students, and their dependents.
  • Direct Subsidized loans – these student loans aid undergraduate students. To qualify for this type of loan, these students need to prove they require financial aid in to be able to handle college costs. This type of federal student loan does not accumulate interest dependent that the student is enrolled in a school.
  • Direct Unsubsidized loans – this type of student loan aids undergraduate students, but candidates do not need to prove they need financial aid to cover college costs. Unlike Direct Subsidized loans – this type of loan will accumulate interest during the course of the student’s studies.

How Much Money Do Federal Student Loans Provide?


The amount of money given in federal student aid will vary depending on several factors. A few of these factors include financial need, type of loan, and type of lender. Professionals or graduates who have been awarded a Direct Subsidized loan will be able to take a student loan up to $20,500 per year.

The average range of loan funds provided annually to undergraduate students who have been approved for either a Direct Subsidized loan or a Direct Unsubsidized loan is between $5,000 and $12,000.

Typically a federal loan limit will be placed on a Direct Subsidized loan or a Direct Unsubsidized loan. This limit controls how much the student will have access to. As the student advances in school, the loan limit will increase.

Private Student Loans vs. Federal Student Loans

If you have not been approved for a federal student loan or you are concerned about your chances of being approved, you may be considering applying for a private student loan. Before applying for this type of loan, it is important to take into account the key difference between these types of loans.

The main difference between private and federal student loans is that private loans are run by private lenders. Federal student loans, however, are run by the government.

Another key difference between these types of loans is that private loans generally work out to be more expensive in the long run. The reason for this is that private student loans may have higher interest rates placed on the loan compared to federal student loan interest rates.

Another difference between these loans is the payment timelines. With federal student loans, you can choose to make payments once you have completed your studies. On the other hand, certain private lenders may expect students to pay a portion of the loan funds before finishing.

Repercussions of Misusing Student Loan Funds

When entering a loan agreement, you will be required to accept the consequences of what would happen should you ever misuse these student loan funds. These consequences may include fines, termination of loans, and more. Infringing this agreement will also hinder your chances of ever being approved to have a loan by other organizations.

It is quite hard for the federal government to pick up whether you have misused your money, but it can be done.

This is why it is always best to ensure you are following your student loan agreement and not misusing the funds.

Tips For Managing Student Loan Money

It can be quite overwhelming trying to manage student loan money for various reasons. Firstly, student loan funds are usually a large sum of money which can make you feel a bit stressed when dealing with it.

Secondly, this money can only be spent on specific educational expenses that need to cover your entire school year. Here are a few tips that will help you manage your student loan money:

  • Monitor the loan amounts – it is a good idea to keep an account of the loan amounts that you have used over the years. Doing this will ensure that you are repaying the right amount.
  • Make a note of expenses – when purchasing any items using the student loan money, make sure to make a note of it. By noting down all the items you have purchased using this money, you can keep track of how you have spent the money.

This record can help you better manage your money and maybe even help you save money in the long run. The saved money can be put toward paying back the loan.

  • Submit payments on time – make sure to always pay your repayments on time. Sticking to the deadline will help you get into a habit of making these payments. Which will help to avoid having trouble keeping track of loan repayments.

Final Thoughts

Student loans make a huge difference in several students’ lives each year. This borrowed money allows students who do not have the financial resources to have access to education that will better their future. This is done by helping students cover the costs of educational expenses and should not be used for any personal expenses.

The items that you are allowed to purchase using your student loan are outlined in the terms and conditions of loan agreements. Most student loans allow students to spend the money on tuition, books, school supplies, college board, etc.

Now that you know exactly what is acceptable to spend your student loan money on and what is not, you should not run into any trouble about misusing these funds.