Federal student loans

What Do Student Loans Cover? Do’s and Don’ts

This post may contain affiliate links. You can read my full affiliate disclosure here.

If you’re like most students, you probably can’t cover your entire cost of college out of pocket. Student loans can help fill the gap, but you might be wondering, What do student loans cover, exactly?

Well, you can use student loans for pretty much any expense you rack up as a student, including tuition, fees, room, board, meal plans, books, personal expenses, and more.

You don’t have to limit your loans to your tuition bills, but instead can use them toward anything that goes into your cost of attendance.

At the same time, it’s important to limit the amount you borrow so you don’t end up with a burdensome amount of debt after graduation.

Read on for a closer look at what you can use student loans for — and what you probably shouldn’t buy with borrowed money.

What do student loans cover?

Student loans can cover any of the expenses that go into your school’s cost of attendance. Beyond tuition and fees, cost of attendance includes all the costs that go into attending school.

Considering this guideline, here’s what student loans can cover:

  • Tuition and fees. You can use student loans to pay for tuition and any institutional fees, including student insurance, lab fees, or on-campus parking fees.
  • Housing. Student loans can also cover the costs of a dorm or off-campus apartment, as well as associated expenses like utilities and WiFi.
  • Meal plans and groceries. Whether you opt into your school’s meal plan or buy your own groceries and cook in an off-campus apartment, you can use your student loans to purchase food.
  • Books, laptop, and supplies. Textbooks and school supplies can be a hefty cost, which student loans can help you afford.
  • Transportation. You may also need to draw on loan funds to pay for a car, gas, car insurance, or a bus or subway pass.
  • Study abroad expenses. Just as you can use student loans on living expenses on campus, you can also use them to cover housing, food, and other costs of studying in another country.
  • Childcare. If you’re a parent studying for your degree, you may need to use student loans to pay for childcare costs.
  • Other personal living expenses. Other costs might come up while you’re in school, such as furniture for your apartment. You can use student loans to buy what you need.

What not to use student loans for

Whether you borrow federal or private student loans, you’ll need to sign a contract called a promissory note agreeing to only use the loan on education-related expenses.

Of course, education-related expenses can span a wide range, encompassing anything from dining hall plans to notebooks to linens for your bed.

In reality, you can use your student loans on just about anything. No one is monitoring your bank account.

But overspending with borrowed money would be shooting yourself in the foot financially. You have to pay student loans back with interest, so you don’t want to use more than you need to get by.

Here are some expenses that you probably shouldn’t pay for with student loans:

  • Restaurants. The costs of eating out can add up quickly. Eating at your school’s dining hall or buying groceries will be the more affordable choice.
  • Entertainment. Concerts, music festivals, movie tickets, and Netflix subscriptions might be fun, but you probably shouldn’t pay for them with student loan money.
  • Fitness studio memberships. Use your school’s gym rather than shelling out borrowed money for a pricey gym membership.
  • Spring break. Avoid using your student loans on spring break or other vacations. That trip will cost you a lot more than you think in the end due to loan interest.

How will you receive your student loans?

When you borrow student loans, you usually don’t get the money directly. First, your lender reaches out to your school to certify its cost of attendance.

You can’t borrow more than your school-certified cost of attendance. For some federal student loans, the borrowing limits are even lower.

Once your lender verifies your information, it will send the funds directly to your financial aid office, which will apply the money toward tuition and fees.

After your tuition bill has been paid, the remaining funds will be sent to you. If you provided your bank account information, you’ll receive the loan as direct deposit.

Can you return unused student loan money?

If you discover that you borrowed more student loans than you need, you can return some or all of the money to your lender.

In fact, you have a 120-day window to return federal student loans before you’re charged interest and fees. Depending on how long you’ve held the loan, your financial aid office or loan servicer can help you return the unused funds.

After 120 days, you’ll be responsible for returning the loan yourself, as well as paying back any interest that has accrued.

If you borrowed private student loans, the rules will vary by lender. Reach out your lender and financial aid office right away for guidance if you want to give back some of your loan money.

How to keep student loan borrowing to a minimum

The average student loan borrower graduates with $32,731 in student loans. On a 10-year repayment plan, that loan amount would require monthly payments of $347, assuming a 5% interest rate. If your interest rate is higher, your monthly payments would be even greater.

As you can see, student loans can become a major, long-term cost after college. To avoid taking on more debt than you can afford, here are some tips for keeping borrowing down:

  • Try not to borrow more than you expect to make your first year out of college. While your career plans might change, this is a useful guideline to keep borrowing to a minimum.
  • Work a part-time job. Whether you qualify for work-study or find an off-campus or online job, making some income as a student can help you cover living expenses without having to use loans.
  • Live like a student. Keep your living expenses to a minimum, even if that means living in a cheap apartment with a bunch of roommates and cooking ramen noodles for a few years.
  • Keep a budget. Tracking what you spend as a student can help you avoid unnecessary splurges.

Student loans can be a useful tool, but over-borrowing can lead to a stressful situation down the line. By keeping your borrowing under control and using your student loans wisely, you can avoid endangering your future finances.


Want better rates? Here are the best banks to refinance student loans:

Variable rates start at...Fixed rates start at...Repayment termsWelcome bonus Check your rates
refinance student loans4.54%4.49%5 - 20 years$200Visit LendKey
refinance student loans4.99%4.47%5 - 20 years$200Visit Earnest
refinance student loans4.22%3.97%5, 7, 10, 15, and 20 years$120Visit Laurel Road
refinance student loans4.53%4.40%5 - 20 years$100 or $200, depending on the amount you refinanceVisit Credible
refinance student loans5.09%4.74%5, 7, 10, 15, and 20 years$100Visit SoFi
refinance student loans4.53%4.83%5, 7, 10, 15, and 20 years$100Visit ELFI