Can You Take Out a Student Loan for Living Expenses?

Student loans are a common financial tool for individuals pursuing higher education, often extending beyond tuition and fees. They can cover various daily living costs while enrolled in a program. This article outlines eligible costs, available loan types, borrowing limitations, and the application process for using student loans for living expenses.

Understanding Eligible Living Expenses

Student loans cover the comprehensive Cost of Attendance (COA) determined by an educational institution, which includes more than direct academic charges. The COA is an estimated figure representing the total expenses for a student to attend for a single academic year, encompassing tuition, fees, and various indirect costs.

Eligible living expenses included in the COA are housing costs (on-campus room and board or off-campus rent and utilities), food expenses (meal plans or groceries), transportation, books and supplies, and miscellaneous personal expenses like toiletries, medical needs, and essential household items. The institution’s financial aid office calculates the COA, and this figure serves as a cap on the total financial aid a student can receive, including loans.

Types of Student Loans for Living Expenses

Both federal and private student loans can cover living expenses, though they differ in their terms and borrower protections. Federal student loans, provided by the U.S. Department of Education, are generally recommended as a first option due to their fixed interest rates, income-driven repayment plans, and potential for deferment or forbearance. These include Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans (for graduate/professional students or parents of undergraduates). Direct Subsidized Loans are for undergraduate students demonstrating financial need, with the government paying interest while the student is in school at least half-time and during grace periods. Direct Unsubsidized Loans are for both undergraduate and graduate students regardless of financial need, but interest accrues from disbursement. Direct PLUS Loans, including Grad PLUS and Parent PLUS loans, can cover remaining costs up to the COA after other aid, though they require a credit check.

Private student loans are offered by banks, credit unions, and other financial institutions. These loans can supplement federal aid when the COA is not fully met through federal programs. Private loans require a credit check and often a co-signer, particularly if the student has a limited credit history. Their terms, interest rates, and repayment options vary widely and are generally less favorable than federal loans.

Borrowing Limits and Disbursement

The maximum amount a student can borrow is tied to their school’s Cost of Attendance (COA) minus any other financial aid received, such as grants or scholarships. Students cannot borrow more than this calculated COA.

Student loan funds are disbursed directly to the educational institution. The school first applies these funds to cover direct institutional charges like tuition, fees, and on-campus room and board. Any remaining balance is then refunded to the student to cover eligible living expenses. This refund is issued via direct deposit or check, typically at the beginning of each academic term.

Applying for Loans Covering Living Expenses

To apply for federal student loans, students must complete the Free Application for Federal Student Aid (FAFSA). This application determines eligibility for various forms of federal financial aid, including Direct Subsidized, Unsubsidized, and PLUS loans. The FAFSA requires detailed financial information, such as income, assets, and tax data, which is used to calculate the student’s financial need and aid eligibility.

After submitting the FAFSA, students receive a financial aid offer from their school, detailing the types and amounts of aid they are eligible to receive, including federal loans. Students can then accept all or part of the offered federal loans. For private student loans, the application process is separate and involves applying directly through individual banks or private lenders. This requires a credit check on the applicant and often a co-signer, which can influence approval and interest rates.