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Loan for Education

How To Use Student Loans For Living Expenses

How To Use Student Loans For Living Expenses

Student loans are a valuable resource for individuals pursuing higher education. They provide financial assistance to cover not only tuition fees but also the cost of living while in college. But does an education loan cover living expenses? Many students rely on education loans to pay for necessities such as rent, transportation, meals, and other day-to-day expenses. In this article, we will explore how student loans can be used for living expenses and provide some tips on managing these funds responsibly.

Can You Use Student Loans for Living Expenses?

If you live on campus, your student loans can help cover living expenses up to your school’s cost of attendance (COA). The COA is an estimate of the total cost of attending college, including tuition fees, textbooks, accommodation, and other related expenses. In this section, we will find out what is included in education loans. Whether you live on-campus or off-campus, you can use your student loan funds to pay for various living expenses such as:

1. Rent: Your monthly rental expenses can be covered by student loans.

2. Transportation: This includes gas expenses, parking fees, public transportation costs, and more.

3. Meals and Groceries: Your food expenses can be managed using your loan funds.

4. Housing Utilities and Supplies: Paying for utilities like electricity, and water bills or purchasing household supplies is permitted.

5. Home Furnishings: Buying furniture or any other necessary items for your accommodation can be funded through student loans.

It is important to note that after the student loan amount is applied towards paying off your college dues, any remaining balance will be returned to you directly. These funds can then be used towards covering the aforementioned living expenses as well as other educational needs like textbooks, supplies, and computer equipment required for your studies.

However, it is essential to remember that the money borrowed through student loans is not free; it accrues interest over time. It is advisable to use these funds responsibly by sticking to essential needs rather than indulging in wants, and keeping track of your expenses using a budget.

Also, read – Full List of Expenses Covered Under Educational Loan

Understanding Cost of Attendance

The cost of attendance (COA) is the estimated cumulative cost associated with attending college. It includes tuition fees, textbooks, accommodation, meals, transportation, and other necessary expenses. The COA varies from one college to another and is adjusted based on the cost of living loans for students in the area where the college is located.

Your school’s COA determines the maximum amount you can borrow through student loans. It serves as a guideline to help students understand the total cost they will incur while pursuing their education.

What Expenses Can Student Loans Be Used For?

Here are common expenses student loans can cover, based on cost-of-attendance guidelines from your Lender and educational institutions:

  • Tuition and fees: Cover core academic costs charged by your college as part of the programme. 
  • Accommodation and utilities: Includes on-campus room and board or off-campus rent, electricity, water and essential household supplies.
  • Books and supplies: Textbooks, course materials, stationery and equipment related to your field of study. 
  • Food and groceries: Basic meal costs and groceries while attending college.
  • Transport: Commuting costs such as public transport fares, fuel and necessary travel to and from campus.
  • Dependents and test fees: Childcare costs and professional testing or certification fees when approved by your Lender and school.
  • Remaining funds: After fees and tuition are paid to your institution, you may receive a refund and use it for other essential expenses in line with your Lender’s policy, but avoid using student loan money for personal use that is non-essential or recreational. 

Student loans must be used for legitimate study-related and living costs, not for luxury or unrelated personal spending.

Also, read – What is Margin in Education Loan?

Expenses You Should Avoid Paying for With Student Loans

  • Entertainment and leisure: Concerts, streaming subscriptions and recreational activities are personal expenses and fall outside approved education or living costs set by your Lender.
  • Vacations and non academic travel: Holiday trips or leisure travel unrelated to your course are not considered necessary expenses and can inflate your repayment burden.
  • Vehicle purchases: Buying cars, bikes or paying vehicle EMIs is not permitted, even if you commute daily, as student loans are meant for basic transport costs only.
  • Frequent dining out: Regular restaurant meals and takeaways are lifestyle choices and should not be funded using student loan money for personal use.
  • Repaying other debts: Clearing credit cards, personal loans or existing liabilities using student loans is not allowed and weakens financial discipline.
  • Luxury and non essential items: High end gadgets, branded fashion and premium accessories not required for academics should be paid from personal savings.

Using loans strictly for approved expenses helps you stay compliant with your lender’s terms and reduces long term financial stress.

How to Make Responsible Use of Student Loan Funds

While student loans for living expenses can be a lifeline for managing living expenses during college, it is crucial to use these funds responsibly. Here are some tips to help you make the most of your education loan:

1. Cover Must-Have Needs First: Prioritise essential expenses such as tuition fees, major living arrangements, and other significant costs when allocating your student loan funds.

2. Look for Less Expensive Alternatives: Consider affordable options when purchasing supplies or other items for school. Look for second-hand options, or consider sharing costs with friends.

3. Crunch the Numbers on Housing Options: Evaluate different housing options that align with your budget. Living off-campus without an expensive meal plan could potentially save you money.

4. Spend Only What You Need: Just because you have been approved for a large loan amount doesn’t mean you have to spend it all. Be mindful of interest charges on any additional amounts used for living expenses.

By being responsible and prudent with your student loan funds, you can prevent unnecessary debt accumulation and set yourself up for better financial stability after graduation. You can thus start living off student loans without much financial crisis.

Also, read – How to Get Education Loan After 12th?

What Happens If Student Loan Funds Are Used for Non-Essential Spending?

Here’s what can happen if student loan funds are used for non-essential spending, based on how loans are structured and should be used:

  • Breach of loan agreement: When you borrow, you agree to use funds only for approved education-related expenses, so spending on unrelated items violates this contract and may trigger action by your Lender. 
  • Immediate repayment demands: If misuse is discovered, your Lender could require you to repay all or part of the loan balance immediately rather than over the original schedule.
  • Loss of future funds: Using funds outside their intended purpose can jeopardise eligibility for further loans or financial aid in upcoming terms.
  • Increased debt burden: Spending irresponsibly leaves less for essential costs and still must be repaid with interest, increasing your overall financial burden.
  • Credit impact and legal risks: Misuse could contribute to default if you cannot meet repayment, damaging your credit and potentially leading to legal consequences.
  • Confusion over expenses: Understanding exactly what does student loan cover helps prevent misuse and keeps your finances on track.

Always budget carefully and avoid using student loan money for personal use beyond basic approved costs.

Alternatives to Using Student Loans for Living Expenses

  • Part time work and internships: Flexible campus or remote roles help cover daily costs while building experience, reducing dependence on borrowed funds.
  • Scholarships and grants: Merit based and need based aid supports living expenses without repayment obligations, making them a cost effective option.
  • Family support or savings: Using personal savings or limited family assistance can lower interest costs and long term financial pressure.
  • Student discounts and budgeting: Careful budgeting, shared accommodation and student concessions reduce monthly expenses significantly.
  • Education focused clarity: Understanding what does a student loan cover helps prioritise essential costs and avoid misuse.
  • Emergency funds and side income: Small freelance gigs or contingency savings prevent reliance on student loan money for personal use and support healthier financial planning.

Also, read – Facts you need to know about Education Loan

Tips for Saving Money on Living Expenses

Here are some tips to help you reduce your living expenses during your college years:

  1. Create a Budget: Track your income and expenses using a budgeting tool or app. This will help you identify areas where you can cut back on unnecessary spending.
  1. Cook at Home: Preparing meals at home is generally more cost-effective than eating out or ordering take out regularly.
  1. Utilise Student Discounts: Many businesses offer discounts specifically for students. Be sure to take advantage of these discounts when shopping or accessing services.
  1. Share Expenses with Roommates: If you live off-campus with roommates, consider splitting the cost of rent, utilities, and groceries. This can significantly reduce your individual expenses.
  1. Opt for Public Transportation: Depending on your location, using public transportation instead of owning a car can save you money on fuel, parking fees, and maintenance costs.

These strategies can help you effectively manage your living expenses and reduce the reliance on additional student loans.

Conclusion

Student loans provide essential financial support to cover not only tuition fees but also the cost of living while pursuing higher education. By utilising student loan funds wisely, students can manage their living expenses without excessive financial burden. However, it is crucial to use these funds responsibly and prioritise essential needs over wants.

Remember to create a budget and track your expenses to ensure you are making the most of your student loan funds. Tata Capital offers various loan options to meet the diverse financial needs of individuals. Whether it’s a personal loan or a home loan, Tata Capital provides professional and trustworthy services with a commitment to enabling growth and financial empowerment.

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FAQs

What expenses are allowed under a student loan for living expenses in India?

In India, approved living expenses include accommodation, food, utilities, books, transport and basic supplies, as defined by cost of attendance and clarified under what does student loan cover.

Can I use my student loan for personal purchases unrelated to education?

No, using student loan money for personal use like shopping, entertainment or travel is discouraged and may breach your lender’s terms.

How do I receive living expenses from my student loan in India?

After tuition is paid directly to the institution, remaining approved amounts are disbursed to your account periodically for eligible living and academic related costs.

Are student loans for living expenses taxable in India?

Student loan amounts are not treated as taxable income, while interest paid may offer tax benefits under applicable sections of the Income Tax Act.

What happens if I misuse my student loan by spending on non-eligible items?

Misuse can lead to loss of future disbursements, immediate repayment demands or stricter monitoring by your Lender, increasing financial pressure later.

Can student loans cover costs for dependents or family members in India?

Generally no, except limited childcare costs abroad if included in the approved cost of attendance and explicitly permitted by the lender.

How should I budget my student loan to manage both tuition and living expenses?

Plan monthly allocations, prioritise essentials, track spending carefully and keep a buffer to avoid shortfalls and unnecessary borrowing during the academic term.

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