Can You Get a Student Loan for Living Expenses?

Student loans can help students meet the financial demands of higher education, covering not only tuition and fees but also daily living expenses. These financial instruments provide support for various indirect educational costs. Understanding how student loans can cover these essential costs is important for individuals planning their educational funding strategy.

Determining Eligible Living Expenses

An educational institution determines a student’s Cost of Attendance (COA), which represents the total estimated expenses for a student to attend that particular school for one academic year. This comprehensive figure includes both direct costs, such as tuition and fees, and indirect costs, which encompass living expenses. The COA serves as the maximum amount of financial aid, including student loans, that a student can receive.

The COA components covering living expenses are broad and account for a student’s basic needs. These indirect costs typically include housing (on-campus dormitory charges or off-campus rent and utilities) and food (meal plan allowance or estimated grocery budget).

Transportation expenses, covering commuting costs or public transit fares, are generally included. The COA also incorporates personal expenses, which can range from toiletries and clothing to a modest allowance for entertainment. Books, supplies, and necessary equipment, such as computers, also fall under the COA. The school’s financial aid office sets these COA figures.

Available Student Loan Options

Several types of student loans can be used to cover living expenses, with federal options often being the primary choice. Federal student loans are disbursed directly to the educational institution and can cover the full Cost of Attendance (COA), including living expenses. These loans offer more favorable terms, such as fixed interest rates and income-driven repayment plans.

Direct Subsidized Loans are available to undergraduate students who demonstrate financial need; the U.S. Department of Education pays the interest while the student is in school, during grace periods, and deferment. Direct Unsubsidized Loans are available to undergraduate and graduate students regardless of financial need, but the borrower is responsible for all accrued interest. For graduate students and parents of dependent undergraduate students, Direct PLUS Loans also cover up to the COA.

Private student loans, offered by banks and credit unions, provide another avenue for covering living expenses, especially if federal aid is insufficient. These loans are not tied to financial need, and their eligibility and terms, including interest rates and repayment options, are determined by the individual lender. Borrowers often require a strong credit history or a co-signer to qualify for competitive rates.

Applying for and Receiving Loan Funds

The application process for federal student loans begins with the Free Application for Federal Student Aid (FAFSA). Completing the FAFSA assesses a student’s financial need and determines eligibility for federal student aid programs. Following FAFSA submission, the school’s financial aid office compiles an aid package, notifying the student of their eligibility for federal loans.

For private student loans, the application process involves applying directly to the chosen lender. These applications require detailed financial information and may necessitate a co-signer, especially if the student has a limited credit history. Lenders evaluate the application based on creditworthiness before approving the loan.

Upon approval, loan funds, both federal and private, are sent directly to the student’s educational institution. The school applies these funds to cover direct charges like tuition, fees, and on-campus housing costs. Any remaining balance, designated for living expenses, is then released to the student. This amount is typically disbursed via direct deposit, physical check, or a school-issued card, usually at the beginning of each semester.