It’s exciting to log into your student account and see that your bill is paid and there’s money left over. Resist the temptation to blow that refund cash on a big-screen TV, new clothes or drinks and dinners out with friends. Federal and private loan funds are supposed to be used for education-related expenses. When you sign the loan agreement or promissory note, you are agreeing to those terms.
There is some good news. Even with the restriction to use the cash for education costs, you have some leeway in setting up your budget. The loan funding is transmitted directly from the lender to the college that awarded the loan. The school automatically applies the money to your account to pay for tuition, room and board, and any other fees on your bill. If there is extra money once the bill is paid, it’s usually easy to request a check or direct deposit for the balance. You can use the money to buy books and school supplies, pay for transportation to campus, buy a computer or even cover the costs of child care so you can attend classes. If you live off campus, the money can be used for rent and other reasonable living expenses while you are in school.