Anyone who has attended college knows the overwhelming feeling that comes with making sure all of your expenses are covered. Tuition, books, and fees are top priority and can typically be covered by scholarships or grants. However, it’s the day-to-day living expenses that can add up and catch you off guard, making it tough to focus on your studies. That’s where a student loan can come in really handy, as long as you go into it with your eyes wide open. Adding more student debt is not ideal, but under the right circumstances and with the right planning, it can ease the burden of meeting your living needs.
Can Student Loans Be Used for Living Expenses?
The short answer is “yes,” but there are some caveats. Generally, student loans can be used in part to cover your living expenses, such as food and shelter while you are in school. The government allows this because it is widely recognized that when students worry less about meeting their living expenses, they are much more productive in school. Where it gets a little tricky is with how living expenses are defined. Certainly, they include your rent, utilities, and groceries. However, trying to stretch it into non-essentials such as cable TV or filling up the cooler for a spring break trip, could cause you to run afoul of your financial aid officer.
Essentially, the costs or expenses of attending school are broken down into three types – direct costs, indirect costs, and Cost of Attendance – which qualify for the use of student loans in covering them.
Direct costs are the basic charges for attending college, including tuition, books, lab fees, and the school cafeteria plan. These are often paid directly through the financial aid office from a grant or loan.
Indirect costs include the cost of living while attending school, such as transportation, personal expenses, and other outside living expenses. These are expenses you pay out of your own pocket.
Cost of Attendance (CoA) is actually a calculation made by the financial aid office to determine what expenses, in addition to your direct costs, will be required for you to attend college. Once a CoA is determined for you, you will know how much you can borrow on top of your grants to cover your costs. Also, your CoA is likely to change each year, so you will need to know what the new amount is each year you attend.
You can work with your financial aid officer to adjust your CoA based on your circumstances and changing needs. For example, your CoA would be higher if you lived off campus versus living in campus housing. If you need a personal computer for your studies, that can be allowed, but you may need to have your CoA increased. You can have your CoA increased for other expenses as well, such as childcare or the cost of maintaining a car for commuting to school. If you are disabled, your CoA can be increased to cover expenses for special services, transportation, or equipment. If you are bringing on a cosigner for a private loan, then you may want to figure out these details before signing the dotted line. Of course, there is also the option to take on your loans by yourself without a cosigner; at any rate, you’ll need to get your numbers in order.
Student Loans are an Expensive Way to Live
While there may not be any student loan monitor watching how you spend your money, it is important to keep in mind that you are living on borrowed funds, which have to be paid back. Using student loans to cover living expenses is not ideal, especially if you’re relying on high interest private student loans. Finding part-time or summer work is always a better alternative. However, if you still need to use student loan money, maintaining control of your expenses and minimizing your borrowing is the key to avoiding a lifetime of indebtedness.
To that end, you need to resign yourself to living like a college student – frugally and mindful of the fact that the money you are spending today is going to cost you a lot more later on. You need to budget like you really mean it, not only to determine how much you should spend, but also to find ways to put more money aside each month. The goal should be to find ways to live well under your means.
The extra money you find in your budget would be best used in paying your loan interest while you are still in school. Even though you are allowed to wait until you graduate to start making your loan payments, you can at least start paying the interest cost, which will make your student loan debt much more manageable later on.