For many people interested in furthering their education, student loans make it possible to cover tuition costs. However, there are other expenses you'll also have to pay for when attending school. In fact, you'll need money to live on while you're earning your degree.
If you don't plan to work and your family members aren't going to support you, you'll have to figure out some way to cover the basics as you complete your educational program. If you aren't certain how you're going to do that, it helps to brush up on the rules for student loans, housing and living expenses to see if it's possible to borrow to cover what you need.
Can student loans pay for housing?
According to the Department of Education, you can use your student loans to cover all of your educational expenses, including cost-of-living expenditures while you are earning a degree. Some other expenses you're allowed to pay for with student loans include:
- Room and board, including rent payments and the cost of groceries
- Equipment and technology needed to complete your coursework, including textbooks and a computer
- Transportation to your college
- Childcare expenses if you have dependent children you're caring for
Generally, when you take out either federal student loans or private student loans, you cannot borrow more than the school-certified cost of attendance. Your school will estimate living costs, taking into account things such as transportation, food, and rent, and you won't be permitted to borrow more than they estimate your costs should be.
If you don't qualify for federal student loans, you'll want to consider taking out a private student loan. Fortunately, Credible makes the loan-shopping process easy, allowing student loan borrowers to compare rates and lenders in one window. Simply, enter whether you're a student or cosigner and your desired loan amount to get started.
Do student loans cover everything?
Although the federal government and private lenders aren't going to keep tabs on your bank account and credit card statements, you do have to agree when borrowing that you'll only use your student loans for education-related expenses. As a result, you should avoid spending your loan money on non-essentials.
Your loans shouldn't be used to invest, start a business, travel, make a home down payment or fund a lavish lifestyle.
So, just make sure you're being wise. Credible can help you navigate the student loan process to ensure you're making the best decisions regarding your personal finance. Click here to learn more.
Should I take out student loans for living expenses?
While the rules for student loans, housing, and living expenses allow you to cover rent, groceries, and other basic costs while you are in school, that doesn't necessarily mean you always want to borrow to pay for all of these things.
Remember, you will have to repay any money you borrow — which affects your spending power later in life. This is especially true once you've exhausted eligibility for federal student loans and have to take out private loans that don't come with all of the same borrower benefits as those from the Department of Education.
If you're able to avoid taking out student loans to cover housing and living expenses — perhaps by working part-time or living at a relative's home while attending school — you may want to take this option. You'll be able to graduate with less debt so you won't face as big of a financial burden during the payback process.
You should also avoid using your student loans to pay for any expenses that aren't education-related. It's unlikely you'll face consequences for misusing your student loans, but if your school determines you've used your borrowed funds inappropriately, they can report this to the Department of Education who can take back the money. In rare cases, you could be prosecuted for financial fraud — an unlikely scenario unless you do much more than spend your loan money on unnecessary, small purchases.
Credible’s online tool can help both students and parents shop around for private student loans and compare them to get the best interest rates and terms. The tool allows students to compare loan rates from multiple lenders at once without affecting their credit score.
How much should you borrow in student loans?
When you are deciding how much to borrow, it's important to remember that you're committing to a future obligation. Aim to take out the minimum amount of loans necessary to cover true essentials so your monthly payments and total interest costs will be lower post-graduation.
An online student loan calculator can better help you understand the impact of your borrowing as you can see how much you'll end up paying after graduating with different size loan balances.
While you'll want to make sure you have the money to cover the essentials, avoid unnecessary borrowing and shop around for a loan at the best rate to help you save money on student loans and make post-graduation repayment easier to handle.
You can visit Credible today to review private student loan options after you've hit your federal loan limits.