Student Loans: What You Should & Should Not Spend Them On

By Jon O'Donnell Updated on January 21, 2022

Your college tuition is probably pretty expensive. If you're like most of the population, you can't afford to pay for it out of pocket. So, you'll need to pay for it using federal or private student loans. After your cost of attendance has been covered, the remaining balance is given to you to pay for the rest of your living expenses. 

If you receive a refund check after you've paid your tuition, you may wonder: Can I spend this money on something “fun” instead? Well, yes and no.  

What you can pay for with your student loans

Both private and federal student loans are meant to help people with financial limitations pay for college costs. As such, they’re intended to make the cost of attending school manageable by helping pay for “qualified educational expenses.” According to the U.S. Department of Education, these qualified expenses include:

  • Tuition and related fees
  • Groceries or meal plan
  • On- or off-campus housing
  • Textbooks
  • Other education costs, such as a computer, notebooks, calculators, or course-specific materials
  • Transportation (especially if you're a commuter)
  • Childcare

While lenders aren't exactly tracking how you spend your student loan refund checks, the money you spend on nonessentials will still be included in your future student loan repayment plan. 

What you shouldn't use your student loans for

When you get your student loan refund check, there are a few other things you may be tempted to use those funds for. However, you should generally avoid spending your student loan money on the following:

  • Other debt, such as personal loans or credit cards
  • Entertainment
  • Frequent take-out food or delivery 
  • Spring break vacations 
  • A downpayment on a car

Essentially, your student loan funds should be used exclusively to pay for education-related expenses. The more financially responsible you are with your student loan money, the lower your loan amount will be in the future. If you feel like you're receiving a higher loan amount than you need, you can always lower the amount by talking to your school's financial aid office.

How else can you pay for your personal expenses in college?

While it's tempting to use your student loans to pay for nonessential personal expenses, there are other ways to earn money during college that won't take up too much time. 

Most college students tend to pick up a part-time job, either off- or on-campus, during the school year to help pay for their personal expenses. You can also work during your school breaks to earn income that you can spend throughout the school year.

Additionally, some schools will offer a work-study program that can help you save money on your tuition and help you pay for your personal expenses. 

Working part-time throughout your college career help keep your student loan debt more manageable after graduation. 

Frequently Asked Questions

Can I use my student loans for noneducational expenses?

Yes, you can use your student loans to pay for your living expenses throughout the school year. Both federal and private loans will provide you with student loans to cover your off-campus rent or on-campus room and board. 

How will I receive my student loan money?

The bulk of the student loan money you receive usually goes directly to your school to pay for your tuition, fees, and housing. After that, you may receive the remaining funds as a check or a direct deposit into your bank account. This is intended to be used to pay for personal expenses relevant to your education (such as textbooks, transportation costs, or a laptop).

This lump sum can arrive at the beginning of the school year or the semester, although some schools have started distributing these funds in installments to encourage more responsible spending among college students. 

Will my student loan refund accrure interest over time?

Yes, your student loan refund check will eventually accrue interest over time. Your refund check is part of your total student loan amount, whether you use a private student loan lender or federal student aid. 

Federal loans will start accruing interest after graduation, but private lenders will start accruing interest on your loan throughout your college career. 

What happens if I use student loans on nonessentials while in college?

Overall, your student loan lender won't be tracking how you use your refund check. However, using those funds if you don't need to will affect your future student loan payments. All of your student loans will start accruing interest at some point. 

Without a cosigner on your loans, you probably have a relatively high interest rate. That means the money you spend on nonessential living throughout college will need to be paid back — and you'll wind up paying back a lot more in debt at the end of the day. 

How do I secure student loan funding?

The first step you should take when applying for higher education student loans is to fill out the FAFSA (Free Application for Federal Student Aid). This will determine your eligibility and financial need for federal student aid. This can come in the form of a pell grant, Parent PLUS loans, unsubsidized, and subsidized funding. 

Next, you'll want to apply for a multitude of scholarships and grants. You won't have to pay these back in the future.

Lastly, if you have not covered your full college tuition, you can apply for a loan from a private loan servicer. Private lenders will often require you to have an average or higher credit score or use a co-signer on your loans. They also usually have a higher interest rate and a higher monthly payment attached to them. 

Find out how to use your student loans the right way with Nitro College

Remember, student loans must be paid back. Citing 2016 statistics, U.S. News & World Report cites that the average graduate today has more than $37,000 in student loan debt. One of the best ways to manage that debt is to be smart about how much you need to borrow. If you get a refund check, you don’t have to spend it. Instead, you can return it and lower your debt obligation.

If you think your current student loans may not be enough for your education, check out our guide explaining 10 ways to solve last-minute tuition gaps. And don’t forget to apply for the Nitro College Scholarship.

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Published in: Private Student Loans

About the Author
Jon O'Donnell

Jon is a writer and marketer for Nitro who is passionate about bringing transparency to the student loan process along with providing families with the information needed to make smart financial decisions. He also just recently refinanced his student loans allowing him to pay them off 5 years faster all while saving an additional $152/month. As he continues to pay them off himself, he strives to help others do the same. Jon also has a long history of connecting people with educational opportunities to help them improve their careers and their overall personal finances. In his free time you can find him reading travel blogs and researching destinations around the world in search of his next adventure. Read more by Jon O'Donnell