What Can Student Loans Be Used For

  • FitBUX
  • |
  • What Can Student Loans Be Used For
Author: dhughes

What can student loans be used for is important to know.

Often times students think they can only use them for books and tuition.  Then they get stuck using expensive private loans for every thing else.

In this article, we’ll cover what you can use student loans on and whether it’s a good idea to do so.

Once you understand the following, you’ll want to know exactly how student loans work so you can max out your Federal loans before using private one.

What Can Student Loans Be Used For Besides Tuition & Fees

When your loans are disbursed to you school, they automatically deduct tuition and fees.  After that, you will receive the difference to your bank account.

Approved Items You Can Use Loans On

According to the Office of Federal Student Aid, the following purposes are approved items you can use your loan amount on:

  • College Tuition and Fees
  • Room and Board – Includes on or off campus living and any type of meal plans needed
  • Books and Supplies
  • Institutional Fees – Examples of this include parking and lab fees
  • Personal Expenses – Such as if you needed anything for your dorm room like a lamp or chair
  • Equipment – Such as if you needed a new computer
  • Dependent Care Expenses – Daycare
  • Transportation – Examples would be any type of public transportation needed and gas
  • Other Documented Costs such as if your school required insurance
  • Study Abroad Expenses

What Can Student Loans Not Be Used For

The Federal government and most private lenders specifically say you can’t use the loan proceeds for the following:

  • Travel
  • Clothes
  • Games
  • Business Expenses
  • Down Payment For A House

However, there are exceptions to these items.

Three examples come to mind:

  1. If you own a car before you take out the loan, you can use student loans to cover maintenance and gas.  However, you can’t use the money to buy a new car.
  2. Same thing with a house as that would fall under room and boarding expenses.  What can exactly be covered should be detailed in your lending docs and change frequently so check that out. One thing we know you can use the funds for… a down payment for a house.
  3. Buying food at a grocery store is ok.  However, dining out at restaurants isn’t.

Do You Need To Be Careful… Yes and No

Do you need to itemize everything you spend the loan money on? The answer is no.

I doubt you will get in trouble if you spend $25 at a restaurant or a bar.

However, there is one scenario I’ve seen trending on the internet that can really put you into hot water.

What To Be Careful Of

There is a trend on the internet telling people to max out their Federal student loans then go on an IDR plan.

The next step is to save all the extra money and invest it.

If the government ever decided to look into this then you could be screwed because the lender can demand immediate repayment of the loan.

That might not be a big deal if you made investments in something like the stock market because its liquid.  However, if the investments went down you’d still owe the money.

Also, if you used the money for a down payment for a house, that is an illiquid investment. You may have to fire sale the house to repay the loan immediately.

Therefore, I highly don’t recommend doing what these ‘internet financial experts’ are suggesting.  Be careful!


What can student loans be used for is pretty straight forward.  Simply, use it for school and necessities. Plus, don’t abuse the system and you should be fine.

With that said, it’s important for you to find out how much you’ll need to survive the semester. You’ll need to know how much tuition costs, your rent and even a general budget for things like groceries.

Know how much you need because you don’t want to take out more than you have to but at the same time, you don’t want to take out too little when all of a sudden you need to use credit cards to survive.

If you’re having trouble deciding just how much student loans you need to take out, become a FitBUX member and schedule a call with us. We’re here to help. Using our one-of-a-kind financial planning technology, we have a tool that will help you exactly for that purpose along with planning for your future to gain financial freedom.

By David Hughes and Joseph Reinke, CFA


Follow me here

About the Author

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}