What can you spend private student loans on?

When you take out a private student loan, it can be tempting to spend the money on what you want. But it’s important to remember that money isn’t a bargain, and your lender isn’t writing you a blank check.

You can usually borrow up to the cost of participation, minus other financial aid, and the lender will set rules for how you can spend the money you borrow. Generally, you can use private student loans for tuition and living expenses. Here’s an overview of what falls into these categories and what you should spend on your private student loans.

What you should spend your private student loans on

Each private lender has their own rules about how you can use loan funds, so check your loan documents or contact your lender for details. Borrowers can usually use private student loans to pay for education and living expenses, which can include:

  • Tuition fees: Private student loans are typically used to pay tuition, which is the basic cost of enrolling in classes. This is usually your biggest education expense.
  • Costs: Your school may charge academic fees associated with your program of study or institutional fees that cover things like school parking and use of campus facilities. Your loans can cover these costs.
  • Room and board: Private student loans can pay for living expenses and meals while you are enrolled in school. These can include on-campus housing, such as a dorm and meal plan, or off-campus housing expenses such as an apartment, utilities, and weekly groceries.
  • Books and supplies: Student loans also cover things you need for class, including textbooks and supplies like pens, notebooks, and backpacks.
  • Transport: While you can use private loans to pay for course access fees — like gas, parking passes, bus passes, and highway tolls — you can’t buy a car with your loan funds.
  • Equipment: If you need equipment to attend your classes, such as a laptop, software, or camera, you can use your loans to cover costs.
  • Dependent care expenses: You may be able to use private student loans to pay for child care or adult care while you attend classes.

What you shouldn’t spend your private loans on

When you take out a private student loan, you typically sign a loan agreement that includes wording about what you can and cannot spend on your private loans. Pay attention to this information, because you could face serious consequences if your lender discovers that you have abused the student loan. For example, the lender may terminate your current loan, require you to pay off the loan balance immediately, and prevent you from borrowing in the future.

You won’t have to send receipts to your lender or show how you used your private student loan funds. But even if you get away with using the loan to splurge, it’s not a good idea because you’ll eventually have to make monthly payments. And those dinners, trips, and shiny new cell phones will cost more when you pay off the loan, thanks to compound interest.

Here’s a list of things you might be allowed to buy with a private student loan, depending on your lender and your contract, but generally shouldn’t spend your loan money on:

  • Entertainment: The funds from your loan weren’t intended to pay for things like concert tickets, streaming services, and movie passes.
  • Non-essential: Some examples include high-end clothing, gym memberships, and a new television.
  • To travel: You shouldn’t use private student loans to pay for a vacation, like a spring break trip, but you might be able to use the money to pay for an accredited study abroad program. Contact the lender and ask for details.
  • Dining out: You can use your private student loans to pay for meal plans or weekly groceries, but it’s not a good idea to regularly use the money to buy restaurants or takeout.
  • Other debts : Don’t use your private student loan to pay off other balances like credit cards and car loans.
  • Emergency fund: In general, it’s a good idea to keep three to six months of expenses in savings. But your private student loans are meant to cover education and living expenses, not your emergency fund.

How to Manage Your Private Student Loan Expenses

With private student loans, the goal is to borrow as little as possible, since every dollar you withdraw will be assessed as interest charges. Here are some ways to control your expenses and reduce your post-graduation loan repayments:

  • Create a budget. Knowing how you will use your loan funds can help you borrow only what you need and minimize interest costs. Your school should tell you how much tuition, fees, and textbooks cost, and you can list your expected living expenses. These can include housing costs, transportation, food, a cell phone plan, and personal necessities. Then determine how much you need to borrow after factoring in scholarships, grants, savings, and money from a part-time job, if any.
  • Find ways to reduce. Once you’ve created a budget, look for ways to save money. For example, you might decide to ride a bike instead of driving to class, work out at the school gym, use your student ID to get discounts, and find free entertainment on campus. . Renting or buying used textbooks is another way to save.
  • Separate the funds. Keeping the loan money in its own account can help ensure that the funds are only used as intended. If the money is mixed into your regular bank account, it’s easier to spend on non-essential things.
  • Find ways to use the remaining funds. If you have money left over after paying your education and living expenses, ask the lender if you can return the remaining funds or cancel part of the loan. If this option is not available or if you have passed the deadline, use the money to make a payment on your student loan balance. You can also keep the money and use it for expenses for the next school term.
  • Get a part-time job. Rather than borrowing money to cover all of your college expenses, consider getting a part-time job or starting a side hustle. You might earn enough to cover all your living expenses and save your student loans for things like tuition, fees, and textbooks.
  • Save money for school. If school is still a few months or years away, consider putting money aside now to cover some of your expenses later. This could be a good option if you want to reduce the amount you borrow but cannot work while enrolled in class.
  • Limit the amount you borrow. Depending on your program of study, research how much you could earn after graduation. Then use this information to predict how much you can afford to borrow, based on your monthly student loan payments. An online student loan calculator can help you estimate this cost.

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