Can you use your college student loans for living expenses?

There are a few certainties in life: death, taxes and the fact that the cost of college continues to climb.

Data from The National Center for Education Statistics states that in 2019–20, the average total cost of attendance for full-time, first-time undergraduate students living on campus at four-year private institutions was $53,200; at private nonprofit institutions, it was $35,100 and for public institutions, the cost was $25,500. 

As a result, the country's student loan debt load is staggering: 43.2 million student borrowers are in debt by an average of $39,351 each. Statistics show that nationwide, 43% of college attendees say they owe educational debt, and 65% graduate with student debt, Eduation.org reports. The same report says 52% of students who had taken on student loan debt did not feel it was worth it. 

With so many Americans taking on large amounts of debt and regretting it, it's worth taking time to consider if there's a more affordable way to pay for education. And what exactly do student loans cover? It's understood that students use them to pay for tuition, textbooks and other school materials. But can you use student loans for living expenses and other non-educational costs? And should you?

Select spoke with financial experts to get the full scoop. 

When applying for student loans, you can either choose to apply for federal loans or private loans. When you apply for either type of loan, and are approved, there is a payout process. Typically, your lender will disperse the funds to cover tuition and fees to your school (usually through the financial aid office). After your college expenses are fulfilled, the financial aid office will send you the remaining balance to spend on things like living expenses, food, books or personal expenses.

In general, student loans are disbursed twice, in two annual payments, one per semester. 

"Once the cash hits your account, you're responsible for how you use it," says Leslie Tayne, an attorney with a focus on student loan debt.

Here are the typical expenses college students need to cover that you can pay for with student loans:

1. Tuition and fees

According to Collegedata.com, for the 2020-21 academic year, the average price of tuition and fees is:

• $37,650 at private colleges
• $10,560 at public colleges (in-state residents)
• $27,020 at public colleges (out-of-state residents)

2.   Room and board

Prices vary by school and city, but Collegedata.com says for the 2020-21 academic year, average room and board costs are

• $13,120 at private colleges
• $11,620 at public colleges

3.   Books, a laptop and supplies 

The College Board says the yearly cost of books and supplies for four-year public college is about $1,300. Costs are likely a bit higher at private colleges.

4. Personal expenses

These can include your cell phone bill, tutoring services, laundry, club fees, internet, transportation, streaming fees and all other entertainment.

Students can certainly use student-loan funds for living costs, says John Li, co-founder of Fig Loans, as they're a part of the equation of attending school. "You need to be able to get to school by living nearby, pay essential bills and have transportation available to you," he says. 

To maximize use for tuition, textbooks and other school uses, Li recommends that students find the least expensive living options they can while they're in school to minimize the need to max out their loans. "Having a few roommates can save you thousands a year. And while budgeting can seem foreign to young people out in the real world for the first time, it becomes all too real once you're working a full-time job and trying to make your monthly loan payments," he adds.

Just because you can use student loan funds to cover your living expenses doesn't mean you should, says Tayne. "The cost of attending your classes is high on its own, so when you add in financing your living expenses on top of that, the debt can add up quickly," she says. 

However, using student loan money to pay for your daily expenses can be better than using a credit card, she argues, since the interest rate is often lower. "If you can cover at least a portion of those costs in cash, you'll be in better financial shape when you graduate," continues Tayne. 

Consider working part-time or picking up a freelance gig here and there to reduce the amount that you need to borrow, she says. "Remember, every dollar you borrow now must get paid back in the future," Tayne says.

"You shouldn't use your student loans to pay for trips, nights out or concert tickets," Li says. "That said, most lenders won't monitor your spending. However, I'd warn students to think very carefully about whether the money spent on the fun now is worth paying it back in full plus interest for the next several years after graduation."

Some college students could benefit from using a credit card with a introductory 0% APR to pay for expensive purchases like a laptop or textbooks.

"Taking advantage of introductory offers, such as 0% interest rates, is one way to use credit as a financial  tool, " says Rod Griffin, senior director consumer education and advocacy at Experian. 

But as with any credit decision, it's important to understand the terms you are agreeing to. These so-called "teaser rates" typically expire after a specified period of time, says Griffin. 

"When using an introductory rate offer it is essential that you have a plan for paying the card off before you are required to pay interest," he explains.

With the right plan in place, using a credit card to cover expenses you know you can pay back can be a useful way to build credit and reduce the student loan bill you may have when you graduate, says Griffin. 

There's another plus to responsibly using credit cards: It can help college students establish their credit history for future purchases like a car or a mortgage.

There are a number of credit cards for college students that offer 0% introductory APR including the Discover it® Student Cash Back and the Bank of America® Travel Rewards for Students. If you need want a longer introductory period, consider the U.S. Bank Visa Platinum Card.

If you're struggling to decide whether to take out more loans so you can cover your living expenses, Tayne recommends making a pros and cons list.

Pros of using student loans to cover living expenses include:

• Likely cheaper than using a credit card due to lower interest rates
• Funding is easy to obtain, even with poor credit
• One-stop financing for educational and personal costs

Cons of using student loans to cover living expenses include:

• Increased student loan balance that will grow due to compound interest
• The temptation to blow your budget and spend on non-essentials

When you take out student loans, the money is yours to allocate for your educational needs. After your tuition and room and board are covered, it's up to you how to spend it. However, since you must pay back these funds with interest, experts recommend that you are cautious with your spending choices.

They suggest you live with a roommate, get a part-time job and look for alternative ways to pay for expenses like a 0 % APR credit card. The consensus of experts is to be judicious with your spending decisions so you're not overwhelmed paying off a lot of debt once you finish college.

For rates and fees for the Discover it® Student Cash Back, click here

Information about the Bank of America® Travel Rewards for Students has been collected independently by Select and has not been reviewed or provided by the issuer of the card prior to publication.