Guest post by Jay Watt
With student loans being the primary way that individuals can even consider college, it is important to understand how they can and cannot be used, since the experience of college extends past simply just tuition. The type of loans you have also dictates how they can be used. Federal funding will have more clear guidelines than private student loans, so assuming you are borrowing money from multiple outlets it is in your best interest to learn about all the rules and conditions associated with each lender so you can view the big picture regarding what you will be financially responsible for outside your student loan funding.
Compare and Contrast
You can research what student loans can be used for when taking out loans with a private lender vs. federal funding. Since with private loans, it is typically up to the lenders’ discretion to set guidelines on what you can and cannot use the loans for this is a good place to look if you are going to need money for expenses outside of tuition during your tenure as a student. Federal loans will likely have better terms and rates however, so applying that money to the largest portion of collegiate expenses makes the most sense.
The bottom line is that it will take some problem solving and finesse to arrange your financial situation in a way that is most beneficial to you long-term. Being vigilant about researching options and comparing them in advance of your need to acquire a loan gives you space and time to ask questions. This time frame can also be used to think about ways to grow your bank account or emergency fund outside of borrowed money. Using excess student loans as savings can be beneficial if you do not have either of these in place but remember you will be responsible for paying that money back, plus interest. Giving yourself an opportunity to find other ways to earn money to be spent during college gives you an opportunity to borrow in a more specific and savvy way.
Yes, this is money that will be spent by you, but always keep in the front of your mind that it does not belong to you. This money belongs to your lender, and you are going to have to give it all back eventually. So be stringent with how you spend it. Nickle and diming your student loan money away may feel insignificant with every £5 purchase but the truth is that £5 might end up being £10, or even £20 on the back end. The point is to make sure how you spend money outside of tuition is worth it, and think about that each time you think to use this money. A study abroad program might be totally worth it, but new clothes and daily premium coffee may not be. Bottom line is you oversee these funds before, during, and after you borrow them, so the tighter you can keep the purse strings, the better off you will be long-term.