What can I spend my student loans on?
With today’s high cost of a college education, more students and parents are in need of applying for financial aid in order to pay the tab. There are a number of ways to obtain financial aid for college, including scholarships, grants, fellowships, and student loans. Such loans may be obtained through government programs and/or through private lenders such as banks and credit unions.
How Are Student Loan Funds Distributed?
When a student qualifies for a loan, in most cases, this student financial aid is distributed two times per year. It is typically done at the beginning of each school semester. Funds received from work study programs, however, are issued to the student each month, in a similar fashion to monthly paychecks.
The budget and eligibility for financial aid are the same, regardless of whether a student lives on or off campus. However, if a student decides to live at home with his or her parents, it is likely that their overall cost of college attendance will be lower and may therefore have an effect on how much aid they are eligible for.
Typically, the full amount of a student’s semester aid will be disbursed at one time, and the amount of tuition and fees, as well as housing and campus meal plan charges are deducted, with the remainder of the funds going directly to the student borrower (or, in the case of a PLUS loan, funds will go to the student’s parent or parents). The amount that is sent to the borrower is referred to as the “refund.”
How Can Student Loan Funds Be Spent?
This balance of funds is generally intended for students to spend on other education-related items such as books, supplies, transportation, and related miscellaneous expenses. However, because a student borrower does not need to track and report what he or she has spent their student loan funds on, there may be times when student aid money does not always go towards paying for true educational expenses.
Living Expenses “Defined”
In allocating student loan funds for living expenses, it is oftentimes difficult to pinpoint just exactly what is and is not a true “living” expense. Although some are rather obvious such as room and board, meals, and transportation, others like entertainment, movie tickets, travel, and new clothing may not be so easily definable.
In order to ensure that one’s student loan funds do not run out before the end of the semester, it may be wise to establish a monthly budget. This will help the student to get a better idea of how much will be needed on a regular basis and will also provide more of an incentive to keep a balance available rather than spending large chunks of the funds up front.
The Bottom Line
For many students, a large check from the government or other lender may be the most money they have ever had access to. Yet, while it may be tempting to spend student loan funds on fun and frivolous items, it is essential to use the funds for the purpose they were originally intended educational expenses.
Otherwise, you may find yourself making years of loan repayments for items that were not nearly as important as a college education and in so doing, it will also cost much more to obtain your college degree.