College  |  April 19, 2022  |  Lisa Litant

From books to burgers: What private and federal student loans can be used for

What you’ll learn
  • What happens to unused student loan money
  • What to use your student loan money for
  • What not to use your student loan money for
  • What to do with leftover student loan funds

Imagine this. You’ve signed all your student loan paperwork and your loan has been disbursed (sent) to your school. Your school takes out what it needs for tuition, room/board, and fees. Then you get the remainder of your loan amount in the form of a debit card or a check.

Let’s talk about what you should do with leftover federal or private student loan money.

What happens to unused student loan money?

Got leftover money from your student loan? Time to treat yourself to a new college wardrobe, right? Not exactly.

Leftover loan money might feel like a windfall, but it’s really not. Remember—you borrowed that money and you’ll have to pay it back with interest when your loan is due.

Consider sending the leftover funds back to your federal or private student loan servicer as a loan payment. That way, you can reduce your total loan cost and graduate with less student loan debt.

Otherwise, use your leftover student loan money for anything you absolutely need for school. As a rule of thumb, ask yourself, “Do I need this to allow me to attend school?” For instance, if you’re a film student, you may need special camera equipment for a class you’re taking. If you’re living in off-campus housing, you may need your student loan money to pay for rent or food.

Here’s what student loans should be used for:

Things you should use your student loan to pay for:

  • Books and supplies
  • Room and board (meal plans, food, etc.)
  • Off-campus housing (rent, utilities, etc.)
  • Transportation (gas, bus pass, etc.)
  • Computers and software
  • Any equipment you need for classes
  • Sheets and towels

Here’s what student loans shouldn’t be used for

Things you shouldn’t use your student loan to pay for:

  • Pizza and beer for your roomies
  • Spring break travel
  • Taking your family out to dinner
  • Buying a new Mercedes
  • An outfit for a friend’s wedding
  • Cleaning services
  • Entertainment (sports, concerts, theater, etc.)

Making smart financial decisions with unused student loan money

Ultimately, any leftover loan money is yours to use how you’d like. While you won’t go to jail for spending student loan money on expenses unrelated to school, it may cost you in the long run. For example, any money you use to throw a party for your friends at college is going to end up costing you way more in the end, when you factor in the interest that will accrue. Part of adulting is making smart financial decisions. Why not start now?

If you have questions about paying for expenses with your student loan (federal or private), you can always ask your school’s financial aid officer for guidance.


footnote Sallie Mae does not provide, and these materials are not meant to convey financial, tax, or legal advice. Sallie Mae makes no claims about the accuracy or adequacy of this information. These materials may not reflect Sallie Mae’s view or endorsement. Consult your own financial advisor, tax advisor, or attorney about your specific circumstances. Reproduction without explicit permission is prohibited.