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Caftor/Shutterstock October 13, 2022 Chelsea has been with Bankrate since early 2020. She is invested in helping students navigate the high costs of college and breaking down the complexities of student loans. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our loans reporters and editors focus on the points consumers care about most — the different types of lending options, the best rates, the best lenders, how to pay off debt and more — so you can feel confident when investing your money. Bankrate logo Editorial integrity
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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. When you take out a , it can be tempting to spend the cash on whatever you want. But it’s important to remember that the money isn’t a windfall — and your lender isn’t writing you a blank check. You can usually borrow only up to the cost of attendance, minus other financial aid, and the lender will set rules on how you can spend the money you borrow. Generally, you can use private student loans for education costs and living expenses. Here’s a closer look at what falls into those categories. What you can spend your private student loans on
Every private lender has its own rules about how you can use loan funds, so check your loan documents or contact your lender for details. Borrowers can typically use private student loans to pay for educational and living expenses only, which may include: College tuition: Private student loans are usually used to pay for tuition, which is the basic cost of enrolling in classes. This is typically the largest education-related expense. Fees: Your school might charge academic fees associated with your degree program or institutional fees that cover things like parking at the school and using campus facilities. Your loans can cover these costs. Room and board: Private student loans can pay for living expenses and meals while you’re enrolled in school. These may include on-campus housing, like a dorm room and cafeteria meal plan, or off-campus housing expenses, like rent for an apartment, utilities and groceries. Books and supplies: Student loans also cover supplies you need for class, including textbooks, pens, notebooks and backpacks. Transportation: While you can use private loans to pay for the costs of getting to class — like gasoline, parking passes, bus passes and highway tolls — you can’t buy a car with your loan funds. Equipment: If you need equipment to participate in your classes, like a laptop, software program or camera, you can use loan funds to cover the costs. Dependent care expenses: You may be able to use private student loans to pay for child care or adult care while you attend classes. What you shouldn t spend your private student loans on
When you take out a private student loan, you’ll typically sign a loan agreement that outlines what you can and can’t spend your private loans on. Pay attention to this information, because you could face serious consequences if the lender finds out that you misused loan funds. For instance, the lender could terminate your current loan, ask you to repay the loan balance immediately and block you from borrowing in the future. Even if you get away with using the loan for unauthorized purchases, it’s not a good idea, because you’ll eventually have to repay that money with interest. Those fancy dinners, extravagant trips and brand-new cellphones will ultimately cost more when you repay the loan, thanks to compounding interest. Generally, you shouldn’t spend your private student loan money on: Entertainment: Your loan funds aren’t meant to pay for things like concert tickets, streaming services and movie passes. Nonessentials: High-end clothing, a gym membership or a new TV aren’t considered necessary education expenses. Travel: You shouldn’t use private student loans to pay for vacations, like a spring break trip, but you might be able to use the money to pay for an accredited study abroad program. Contact the lender and ask for details. Dining out: You can use your private student loans to pay for meal plans and groceries, but some lenders may prohibit restaurant costs or takeout food. Other debts: Don’t use your private student loan to pay off other balances, like credit cards and auto loans. Emergency funds: Generally, it’s a good idea to keep three to six months’ worth of expenses in savings — but your private student loans shouldn’t be used to fund this, because it’s money you’ll have to repay in the future. What happens to the financial aid I don t use
It’s important to borrow only as much as you need through student loans; remember, the more you borrow, the more you’ll have to pay in interest charges over time. If you can pay for some expenses out of pocket or through scholarship or grant money, it’s often a better choice to do so. With that said, sometimes students overestimate how much money they truly need through student loans. If you have money left over after paying for your education and living expenses, ask the lender if you can return the remaining funds or cancel part of the loan. If this option isn’t available, you can use the money to make extra payments on your student loan balance. How to manage your private student loan spending
To minimize the amount you need to borrow through student loans and shrink your postgraduation loan payments, start by . Look at your total cost of attendance and make a list of expenses, like tuition, fees, textbooks, housing, transportation, food, toiletries, a cellphone plan, bills and insurance payments. Add these up to calculate your weekly, monthly and semester-long costs. Always look for ways to cut back on spending. For example, consider riding your bike instead of driving to class or using the school gym instead of getting an outside gym membership. You should also ask about student discounts at bookstores and grocery stores. After you’ve determined your estimated expenses, deduct the amount you expect to earn from , grants, savings and money from a part-time job, if applicable. The remaining amount is how much you should borrow through loans. SHARE: Chelsea has been with Bankrate since early 2020. She is invested in helping students navigate the high costs of college and breaking down the complexities of student loans.