Yes, it is possible to use student loans for living expenses in college, under certain circumstances. When you sign your master promissory note for student loans, you are able to borrow based on the cost of attendance of the school, which includes many living expenses. There’s many expenses to the cost of college than just tuition, and the Department of Education is well aware of them. This is why your borrowing is based on the cost of attendance and not simply the tuition costs. Let us break down how the cost of attendance is calculated.
Costs of College: Direct Costs, Indirect Costs and Cost of Attendance
The way you’ll typically see college expenses broken down is into two categories: direct costs and indirect costs., which combined make up the cost of attendance (CoA). These costs are important to understand when you’re considering using student loans for living expenses.
Direct costs are the charges that come from the campus itself for attending school. These include tuition, dorm fees, and cafeteria plans. Any cost that comes in the form of a bill from your university or college is considered direct.
Indirect costs are costs from outside the college that are necessary to attend college, such as transportation and personal expenses. For example, your college won’t directly charge you for a car or bike to attend school, but depending on your campus, you may need one or the other to get to class. Off-campus housing is also considered an indirect cost.
Cost of Attendance
Your cost of attendance is the sum of direct and indirect costs as calculated by your college financial aid office. This number is usually determined using the average indirect cost amount for a student at your college. Knowing your published CoA is important if you’re considering borrowing extra funds for living expenses. This is because student loan lenders limit the amount you can borrow based on your CoA and will not allow you to borrow more than that number.
Your total cost of attendance includes the following (your CoA may also include additional costs):
- Tuition and associated fees
- Books and supplies
- Personal expenses
- Rental or purchase of a personal computer
- Other documented, authorized costs
See Section 6 of the Master Promissory Note.
Average Cost of Attendance
The following are some examples of COAs reported by College Data for the 2017-2018 academic year.
Public Colleges (In-State)
– University of California, Berkeley – $36,015
– University of Michigan, Ann Arbor – $29,526
– University of North Carolina, Chapel Hill – $25,407
– Stanford University, Palo Alto, California – $69,584
– Cornell University, Ithaca, New York – $70,371
– Duke University, Durham, North Carolina – $72,554
See more on the average cost of college in 2018.
How to Use Student Loans for Living Expenses
Borrowing money to pay your tuition is straightforward: you have a set dollar amount that must be paid to the school for each year of attendance. But borrowing money for living expenses can get more complicated. It’s important to fully understand how you’ll receive your money, what type of loan you should apply for, and how much money you really need to borrow.
While it isn’t uncommon for students in costly degree programs to take out multiple loans, your first choice should be to try and qualify for a subsidized loan. This is because, with subsidized student loans, the government helps pay the interest and offers more flexible repayment plans.
Unsubsidized loans can also be used to help pay for living expenses. While the loans are typically not as beneficial as subsidized, there is no difference as far as how the money can be spent and the disbursement of funds based on the CoA. It may be wise to learn all the differences between subsidized and unsubsidized loans before applying.
How to apply:
Your FAFSA will give your college the information it needs to determine your Expected Family Contribution. This amount will be subtracted from your cost of attendance to get the total amount you’re eligible for in subsidized loans. You can use the Fafsa4caster to see how much aid you would be eligible for.
Using Your Financial Aid Surplus
If you qualify for a federally-backed student loan, you can use your financial aid disbursement surplus to pay for your miscellaneous living expenses. In most cases, your disbursement will be forwarded directly to your school’s financial aid office, where the amount of your tuition will be taken out. Once this process is complete, you can ask your financial aid office for a refund of the surplus (whatever’s left over). You can then use that refund to pay whatever expenses you have. It isn’t uncommon for a school to withdraw too much from students’ financial aid disbursements, so keep a close eye out for discrepancies.
If you’re not eligible for a refund or a subsidized student loan, you can still use student loans to pay your living expenses. You may, however, need to take out an additional loan to do so. The downside of this method is that you won’t be able to take out another federal subsidized loan to pay for your living expenses. You, therefore, must take out a private loan, which isn’t backed by the federal government. Private loans typically have better interest rates but are less flexible on repayment terms.
Know Your Net Price
To find out how much you’ll have pay out of pocket with the financial aid you’re receiving, you’ll need to subtract your total financial aid from your cost of attendance, or “sticker price”. The resulting number is your “net price”.
Knowing your net price can help you decide whether you can afford a school or not, and whether you need to borrow more money to do so. It can also help you choose the right school.
For example: you may have two different colleges in mind—your dream school and your backup plan—and your dream school’s COA is likely greater than your backup plan’s COA. But because of the way financial aid is calculated and disbursed, your out-of-pocket expenses, or “net price” may be the same for both schools.
College Data offers a tool for calculating your net price so that you can plan ahead and make the smartest choice.
Are Using Student Loans for Living Expenses a Good Idea?
Student loans can help you make ends meet when you can’t afford living expenses at your college. However, you don’t want to bury yourself in debt just so that you can afford date nights and morning lattes. It’s therefore very important to create a realistic budget and borrow wisely. You might be better off finding an online job while in college than borrowing to pay your living expenses.
Student Loans for Expenses Outside of College
It’s also important to understand that student loans are not intended to be used at any time other than when you are attending school. While the accessibility of student loans may be tempting to continue using even if you’re no longer attending, these loans are exclusively meant to be used by college students who are actively attending classes.
Minimize Your Borrowing
Living on borrowed money can quickly lead to living beyond your means, which can, in turn, put you in debt for decades to come. If you find yourself in need of too much borrowed money to meet your living expenses, consider attending a less expensive college or finding ways to reduce your living expenses.
Using Student Loans Wisely
The decision to take on a student loan—or multiple student loans—isn’t one to take lightly. If you find yourself unable to pay tuition and living expenses with family contributions, scholarships, and other funds, a loan is likely your best option, but only if used wisely and sparingly.
Student loans—even federal ones—can stick with you and accrue interest much longer than other types of debt, and they can’t be shed as easily through bankruptcy. If you’re considering student loans for living expenses, make sure you borrow only what you need, you fully intend to graduate college, and you stick to a budget.
Compare the Best Student Loan Refinance Rates
Here are our top student loan refinance picks for 2019
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Student Debt Relief Loan Refinancing Advertiser Disclosure
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
LendKey: Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
CommonBond: Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate.
SoFi: Fixed rates from 3.890% APR to 8.074% APR (with AutoPay). Variable rates from 2.550% APR to 7.115% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.550% APR assumes current 1 month LIBOR rate of 2.50% plus 0.04% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms of 10 years or less. For loan terms of 10 to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 2019 and are subject to change based on market conditions and borrower eligibility.
Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/23/19. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at email@example.com, or call 888-601-2801 for more information on our student loan refinance product.