Can You Take Student Loans for Living Expenses?

Student loans can often be used to cover living expenses while pursuing higher education. These financial aid options support the broader “cost of attendance” (COA) as estimated by educational institutions. This comprehensive cost includes indirect expenses beyond direct educational charges, allowing students to focus on studies without immediate financial strain.

What Student Loans Cover

The Cost of Attendance (COA) at an educational institution encompasses both direct and indirect expenses a student is expected to incur. Direct costs typically include tuition, fees, and on-campus room and board. Indirect costs include essential living expenses like off-campus housing, groceries, transportation, and personal items.

The COA also accounts for books, course materials, supplies, and necessary equipment. Each school determines its own COA, which serves as the maximum amount of financial aid, including student loans, a student can receive. These figures are estimates of average costs for different student categories, not strict budgets, but they establish the permissible borrowing limit.

How Loan Funds Are Disbursed

Student loan funds are typically disbursed directly to the educational institution. The school first applies these funds to cover direct charges, such as tuition, fees, and on-campus housing costs. If any loan money remains after these institutional charges are paid, this excess amount, often called a refund, is then released to the student.

This refund is commonly provided through direct deposit or via a mailed check. Disbursement usually occurs at the beginning of each academic term, often within the first 10 to 30 days after classes begin. First-year undergraduate students who are first-time borrowers may experience a delay of up to 30 days after their enrollment period starts before receiving their initial loan disbursement.

Managing Loan Funds Responsibly

Receiving student loan funds for living expenses requires careful financial management, as they must be repaid with interest. Develop a budget and track spending to ensure funds last throughout the academic period. Borrowing only the amount necessary helps minimize future debt obligations.

Understanding how interest accrues on student loans is important. Unsubsidized federal student loans begin accruing interest from the moment funds are disbursed, even while a student is in school. This interest can add to the principal balance through capitalization if not paid while in school, increasing the total amount to be repaid. Considering alternative funding sources, such as grants or scholarships, before relying heavily on loans for living costs can significantly reduce the overall debt burden after graduation.