Can Federal Student Loans Be Used for Living Expenses?

Federal student loans can be utilized to cover various educational costs, extending beyond just tuition and fees to include living expenses. These loans assist students with their comprehensive cost of attending college or career school.

Understanding Eligible Living Expenses

Federal student loans are intended to help cover a student’s full “Cost of Attendance” (COA), determined by each school. This comprehensive figure includes both direct costs, billed by the institution, and indirect costs. Schools establish a COA to estimate total expenses for a year, using this figure to determine financial aid eligibility.

Eligible living expenses typically encompass necessities for students. These often include housing costs (on-campus room and board or off-campus rent and utilities), food, transportation, and personal expenses like toiletries and clothing. Funds also cover course materials such as books and supplies, and technology like a personal computer. The precise breakdown and allocated amounts for these categories are specific to each school and part of the student’s financial aid package.

How Federal Student Loans are Disbursed

Federal student loan funds are disbursed directly to the student’s school. This process occurs in at least two payments, often once per semester or term. The school applies the loan money first to direct charges on the student’s account, such as tuition, fees, and on-campus room and board. This ensures primary educational costs are covered directly.

After institutional charges are paid, any remaining balance from the loan is then refunded to the student. This excess amount covers other indirect living expenses. Schools commonly issue these refunds through direct deposit or by mailing a physical check. Processing time varies by institution, typically 7 to 14 business days.

Determining Your Loan Amount

The federal student loan amount a student receives is based on the school’s Cost of Attendance (COA). The COA is the maximum financial aid, including loans, a student can receive for an academic year. This figure incorporates both direct costs, such as tuition and fees, and indirect costs like living expenses, books, and transportation.

A student’s financial need, calculated by subtracting their Student Aid Index (SAI) from the COA, also plays a role in determining eligibility for need-based federal loans. Federal loan programs, such as Direct Subsidized Loans and Direct Unsubsidized Loans, have specific annual and aggregate borrowing limits that vary by a student’s grade level and dependency status. For instance, undergraduate annual limits range from $5,500 to $12,500, while graduate students can borrow up to $20,500 annually in Direct Unsubsidized Loans. Direct PLUS Loans, available to graduate students and parents, allow borrowing up to the full COA minus any other received financial aid, without a specific aggregate limit.