Can My College Loan Cover Living Expenses?

Some lenders will allow college loans for living expenses, while other are more strict about where the funds can be directed. Typically, there are two general categories of student loans. Tuition loans are often paid directly to the college and cannot be spent otherwise. College student loans, on the other hand, may be deposited into the student's account for use during the course of a year. Even then, the items these loans can be spent on may be limited.

Federal Loans

Federal loans are directed solely at the cost of tuition. This is not exclusive to one form of federal loan. In fact, Stafford Loans, Perkins Loans and PLUS loans all contribute directly to tuition. Each semester or term, a student applies for only the funds needed to cover the cost of tuition for that term. Then, the college delivers these funds directly to an account with the college's financial department. Next term, the student must submit another round of applications for financing. Even PLUS loans, which are issued in the name of the parents rather than the student, go straight to the university. These funds may not be spent on any supplemental item, not even books or rooming.

Tuition-Only Loans

Even some private loans go straight to tuition. This is the most common form of private loan offered to college students. Typically, college students will have a small gap in financing after all federal loan options have been exhausted. Only the neediest students will have their tuition covered 100% by federal loans. The remainder goes to tuition-only private loans. Private loans have higher interest rates than federal loans on the whole. Some private loans, though, can be guaranteed by the federal government to reduce the expense.

Living Expense Loans

Private lenders are the only organizations offering assistance in living expense. These loans are usually issued based on an estimate of the cost of living in a given area. The cost of living is often provided by the school itself, which compiles estimates based on factors like the cost of room and board, cost of meal plans and other factors. Schools with the most on-campus services tend to be the most affordable. Schools with a lot of commuters and off-campus life may have higher living expense requirements. In this case, the rents in the area will be used to estimate cost of living instead of dorm expenses. 

Student Credit Cards

Student credit cards can be used to cover day-to-day expenses like dining out, entertaining or going on trips. Many banks offer student credit cards, which are essentially just personal credit cards offered to young people with lower abilities to pay. Because the lender is advertising to students, the lender will set lower credit requirements to get financing. The lender may also allow for a long grace period before repayment is required. Interest-only payment is common during the school year, and many students carry the burden of repaying credit card debt over break when they are able to work. Student credit cards can be very pricey due to the affect of compounding interest during a grace period.

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