How student loans can be used for more than just school tuition

By and large, tuition is the most significant expense associated with higher education — but it's far from the only cost. Most students may think their federal and private loans can only be used for school fees like tuition and room and board. In reality, loans can be applied to many expenses that are associated with the school's cost of attendance.

That cost extends to more than just the obvious expenses — it also includes housing supplies and furnishings, books, groceries and meals, and other personal expenses.

"Most student loans can be used for the entire cost of attendance at a particular school, minus other financial aid you receive. The cost of attendance includes a lot of different expenses and is determined by your school’s financial aid office. Obviously you have tuition and fees, but ‘cost of attendance’ also allows for your living expenses, food, books, supplies, a personal computer, transportation, as well as personal expenses like child care or costs related to a disability ," said Laura Morgan, vice president of communications, savings and legal affairs at College Foundation, Inc.

In order to receive enough money from loans to cover the expenses beyond tuition and fees, students don’t need to make a special request. When N.C. Assist loans and most other student loans are approved, the funds are disbursed directly to the student's account at the college and automatically applied toward all direct charges on the account — such as tuition, fees and room and board — just like scholarships and grants. Once all charges are covered, any funds left over are then issued to the student and can be used to pay for indirect costs.

Since this money still has to be used on allowable expenses, however, students can't just splurge on new clothes or the latest gadgets. Instead, Morgan recommends using the funds to cover things like supplies specific to a student's major — think scrubs, or graphing calculators — as well as rent for an off-campus apartment and transportation fees.

Additionally, if students are hoping to participate in a study abroad program, they can use loan funds to cover the extra expenses of the semester.

For many, managing the loan funds after the school has deducted its portion is their first time to dip their toes in the waters of budgeting.

"Students should map out what costs they expect to have for the semester, like books, rent and utilities for an off-campus apartment, groceries, transportation costs like parking or a bus pass, and divide these costs to know exactly what they should budget each month," said Morgan. "Without planning, students may find themselves overspending early and fall short when bills for rent or other essentials come due."

To help with budgeting loan money, students should search for ways to cut down on expenses. For example, shop around for used books, take advantage of campus meal plans and research laptops that offer a blend of affordability and reliability.

Aside from big-ticket or one-time purchases, students who are starting their budgets should keep track of all their receipts over at least a few weeks. Then, they can calculate exactly how they spend their money on a day-to-day basis and better visualize their spending habits.

If feasible, students might consider using any excess funds to get a head start on paying off higher interest loans. While loans like those offered by N.C. Assist provide a low fixed-rate, other loan programs involve adjustable-rate loans that can balloon after graduation, leading to higher payments than anticipated.

Before taking out any loan, students should be sure they understand exactly how much the interest will change down the road and what they can expect for monthly payments.

"The best thing students can do is borrow as little as possible and understand exactly how the terms of their loans work. A student who plans to live at home or who is in a work study program may not need to borrow the entire ‘cost of attendance’ for their school. Students who take some time to research how much money they will actually need, as well as understand how interest can affect their loan balance, will lay a strong foundation for their future," said Morgan. "If you can swing it and you have a part-time job, paying off a little interest while you're still in school can help a lot to keeping those payments low later on."