Can I Use FAFSA Money to Buy a Car?

The Free Application for Federal Student Aid (FAFSA) serves as a gateway for students seeking federal financial assistance to pursue higher education. This application helps determine eligibility for various forms of aid, including federal grants, work-study programs, and student loans. The primary objective of FAFSA is to help make college or career school more accessible and affordable for eligible individuals.

Understanding Eligible Educational Expenses

Federal student aid funds cover costs associated with pursuing an education. Educational institutions calculate a “Cost of Attendance” (COA) for each student, which estimates total expenses for an enrollment period. This estimate includes both direct costs paid to the school and indirect costs a student might incur.

The COA encompasses several categories of expenses. These include tuition and fees, which are direct charges for courses and institutional services. Room and board is another significant component, whether a student lives on campus or receives an allowance for off-campus living.

Beyond these core costs, the COA also accounts for books and supplies necessary for coursework. This can include an allowance for general course materials and sometimes even a personal computer. Additionally, an allowance for transportation and other miscellaneous personal expenses are factored into the overall COA.

Financial aid funds are first applied to direct institutional charges, such as tuition, fees, and any on-campus housing or meal plans. Any remaining financial aid after these direct costs are covered may then be disbursed to the student.

How Transportation is Included in Your Cost of Attendance

While FAFSA funds do not directly facilitate the purchase of a car, the Cost of Attendance (COA) at a student’s educational institution includes an allowance for transportation expenses. This allowance is an estimated amount designed to help cover the costs associated with a student’s travel to and from school and other essential education-related activities.

The transportation component of the COA is not for buying a vehicle. Instead, it covers ongoing expenses such as gasoline, oil, and vehicle maintenance for a car already owned. It can also account for public transportation fares, like bus or train passes, or car insurance costs.

Educational institutions determine this allowance based on average costs for students in their specific area and commuting patterns. For instance, the allowance might be based on mileage rates for commuters or the cost of local public transport. This estimated amount is integrated into the student’s total financial aid package.

Guidance from the U.S. Department of Education explicitly states the transportation allowance within the COA cannot include the cost of purchasing a vehicle. The intent is to cover incremental costs of getting to and from educational activities, not to finance a vehicle acquisition. Therefore, buying a car with federal student aid directly is not permitted.

Managing Financial Aid Refunds

When total financial aid awarded exceeds direct charges billed by the school, any remaining balance is issued as a financial aid refund. This occurs after the institution applies the aid to tuition, fees, and on-campus housing costs. These excess funds are then disbursed directly to the student.

Students receive these refunds through various methods, such as direct deposit into a bank account or a paper check. The timing of disbursements can vary by institution, often occurring a few weeks after the start of a semester. Setting up direct deposit often provides the quickest access.

Once a student receives a financial aid refund, they become responsible for managing these funds. The expectation is that these funds will be used to cover other eligible educational expenses outlined in their COA that are not directly billed by the school. This includes costs such as off-campus housing, groceries, books purchased elsewhere, personal expenses, and transportation costs like gas or public transport.

While the school does not track every individual expenditure after the refund is issued, students are expected to use these funds responsibly for education-related needs. Mismanagement can lead to financial difficulties, as any loan amounts received will eventually need to be repaid with interest.