Most people know that student loans can be used to pay tuition, but there are other expenses you can use student loans to cover as well.
Here are some examples of what expenses can be paid with student loans and how much you can expect to pay out of pocket if you want or need to use them.
✓) Student Loan Interest Rates
The interest rates on federal student loans vary depending on the type of loan. Stafford Loans have a fixed interest rate that is recalculated annually. The current rate for the 2017-2018 school year is 4.45%.
PLUS Loans also have a fixed interest rate, but they are tied to the prime lending rate and change as needed with an additional margin added to it.
✓) Student Loan Repayment Plans
The type of repayment plan you choose will determine what types of payments you are making and how long it will take to repay your debt.
When deciding on a repayment plan, you should consider your budget and how much disposable income you have every month to cover all of your other obligations such as housing, food, clothing, transportation and education.
You also need to think about the monthly payment amount under each plan and whether the monthly payment is more or less than the minimum required monthly payment for the total amount owed on the loan(s).
The following list outlines some common repayment plans:
✓) Cover Tuition
Tuition is one of the most common reasons people take out a loan, but it’s not the only expense. There are other costs associated with going to school that you may want to consider as well.
For example, there’s the cost of books and supplies, which could range from $1,000-$2,000 per semester. And then there are living expenses such as food and housing.
Housing prices near college campuses vary widely depending on the city, so make sure to research your area thoroughly before deciding how much money you’ll need for rent each month.
It’s best to estimate higher than you think because that way if things go wrong or if you need more money for anything else (like clothes or car repairs), then at least your rent will still be covered.
✓) Book Purchases
Books are considered a necessary purchase for college and graduate students, but they are also quite expensive. Fortunately, most student loan providers offer at least some form of book stipend or book allowance.
In order to qualify for a book stipend, you will need to have an eligible loan like the William D. Ford Federal Direct Loan Program or the Federal Perkins Loan Program.
If your school is not listed as an eligible institution on your lender’s website, contact them and ask if they are able to help you with this request.
✓) Health Insurance
Fortunately, there are many ways that students with health insurance can cover their monthly costs: through a state-sponsored program, getting family members to add them as an additional policy holder, or even getting health coverage through their college itself.
There are a number of companies and organizations out there that offer affordable plans for young people who aren’t offered benefits at work and don’t have other options.
Some colleges also offer discounted plans for students on campus who want to stay close to home for school and live in the dorms.
✓) Rent Increase
We all need a roof over our head, and housing is usually the biggest expense for college students. Living on campus is often cheaper than living off-campus, but there are still plenty of costs to keep in mind.
If you live on campus, your tuition fees will include a housing charge that covers some of your rent, but not all of it.
If you live off-campus, you’ll have to pay the full amount up front and then make monthly payments.
✓) New Furniture/Appliances
If your school requires you to have a laptop, then you may be able to use your loan for that. You might also be able to buy furniture and appliances with the loan if you’re moving off campus.
For example, if you need to buy a refrigerator or washing machine and you don’t have a lot of money saved up, then this would be an option. The downside is that most of these items will depreciate quickly.
✓) Car Repairs
You might be wondering, Can I use my student loan to pay for car repairs? Well, the answer is yes. However, there are restrictions as to what you can and cannot do with your student loan.
For example, you cannot use your loan to buy a new car. You also cannot use your loan to pay off an existing car loan or pay for insurance.
Utilities are a part of life, but they don’t have to drain your bank account. You may qualify for utility assistance through the Low Income Home Energy Assistance Program (LIHEAP), and the state-funded utilities bill program.
The LIHEAP program offers energy bill help to households that meet certain income requirements, while the state-funded utilities bill program is available to people who meet certain state residency requirements.
✓) Auto Insurance (New Driver)
If you are a new driver who just got their license, but don’t have any experience driving, you may want to purchase auto insurance.
Auto insurance is important for all drivers, but it’s especially important for new drivers because they are more likely to get into an accident or cause an accident that causes damages.
Not only does having the proper coverage protect your vehicle and finances, but it protects the other people on the road with you.
For example, if someone crashes into your car and doesn’t have insurance, then you would be responsible for covering repairs out of pocket which could take years off of your car loan!
A good place to find affordable auto insurance is with GEICO.
✓) Haircuts/Hairdressing salon
One of the more obvious examples is a visit to a hair salon. You may need to get your hair cut or styled, but you don’t want to spend the money on it.
One option is to pay for the services with a credit card and then use your student loan funds to pay off that balance over time. Another option is to sign up for a service like Groupon, which offers discounts at salons.
And if you do have extra cash in your budget each month, an investment in some good haircare products might make sense.
✓) Savings Accumulation
Student loans are a great way to make sure your education is paid for, but they do not cover all of your expenses.
In fact, many students rely on their student loan money to cover living costs during the school year while they are in school. However, there are some other ways to pay for things like tuition and textbooks with a loan.