What's the best way to do take out a student loan to pay for non-tuition costs?

August 1, 2006 11:35 AM

Can I use my (private, not federally subsidized) student loans to pay for things other than those directly related to school?

I go through Sallie Mae and have had a few financial incidents that formed a sort of perfect storm. I would like to take a loan out for car insurance payments and some minor car repair that would end up costing ~$3,000 total. I have only taken out tuition costs and never applied for loans to cover books or housing.

How does this work? Will I receive cash or check for this? Will I ever see the actual money or does it have to go directly to the people who want my money. Preferably I would like to fill out the forms and receive a check for the amount I request. Do I have to justify why I need that money (again, never took out money for books or housing)? My previous experience has been filling out a form on Sallie Mae's web site, and never actually seeing any of the money.

posted by anonymous to work & money (14 comments total)

AFAIK, if it's a private student loan (not govt subsidized) you can use the proceeds for anything that you deem school related ie if you want to live off campus in a private home, you can use student loans to cover that expense. My ex husband relied only on student loans when he was in grad school and believe me, he didn't scrimp at all. He even went to Europe for a month and it was all paid for with student loans. Of course, now he will be making gigantic mortgage sized payments until the day he dies, but that's his problem.

It seems like I read somewhere about a woman who would max out her credit card and because she was a student would take out a student loan to pay it off. It seems like with private student loans you get the money directly
posted by hollygoheavy at 11:47 AM on August 1, 2006

The lady holly referred to was recently on Oprah. Although it's not a great plan, you can use private student loans pretty much however you want. They'll just send you a check (or perhaps send it to your school first, so make sure you don't owe the school anything).
posted by MrZero at 11:51 AM on August 1, 2006

My experience has been that yes, you can. It probably depends on a few different circumstances, but I have gone through Citi for my loans. Citi gives the funds to my student account at school, and once the tuition part is paid (or basically, once I have a positive balance), I ask the student accounts office to disburse the funds to me via check (which of course I take to the bank and deposit and voila - funds for living expenses!). However, this financial aid is awarded to me based on need, so the main question is whether or not you'd receive such loans in the first place.

Why don't you call the financial aid or student accounts office at your school though? You don't have to explain about your car, etc, but just ask about the process and if you would qualify for additional loans.
posted by ml98tu at 11:53 AM on August 1, 2006

I took out close to $8K in student loans when I was in college, and only used about 1/2 of it towards school-related costs. My wife is wearing the other half on her ring finger. They send you a check, and no one monitors how you spend it... at least that's how it worked about five years ago.
posted by bjork24 at 11:54 AM on August 1, 2006

Vacationed in Germany on mine. They don't care.
posted by unknowncommand at 11:58 AM on August 1, 2006

Totally! No problem. At all the universities that I've attended, the financial aid office cuts me a check from whatever's leftover from paying fees.
posted by k8t at 12:15 PM on August 1, 2006

Bought a sweet Volkswagen Fox with mine so I could do an off-campus internship.

Like others, I'd get a check for the leftovers at the beginning of each semester, after everything was paid for.
posted by M.C. Lo-Carb! at 12:45 PM on August 1, 2006

i was on scholarship and took out loans s i wouldnt have to work. i used my checks to go to New Orleans every year for 4 years. we bought lots of liquor and one of my roommates secured quite a drug habit.

i also bought book, a car, a computer and school clothes. they dont monitor it. once you cash the check, its yours to do with as you please.
posted by Davaal at 12:58 PM on August 1, 2006

oh, i also knew i was going into the army and they'd pay off my loans. FYI.
posted by Davaal at 12:59 PM on August 1, 2006

IAAL.

Everything depends on what the loan agreement says. You'll just have to sit down (maybe with a magnifying glass) and read the paperwork all the way through. It's long, but almost certainly understandable.

If the agreement restricts your use of the money to school-related expenses, there's nothing that stops you from using it for other purposes, but it's still a violation of the agreement.

The agreement may well give the lender the right to accelerate the loan, i.e., demand that you pay it all, immediately, if they find out you've violated the agreement terms. They'll certainly find out if you default on payments.

If the loan is guaranteed by the government, using the money for non-academic purposes could even be a crime.

I'd put the extra money aside for unexpected academic expenses -- registration fees, lab fees, extra books, copying, typing, printing and binding services, etc.
posted by KRS at 1:24 PM on August 1, 2006

Keep in mind that it will take you 15+ years to pay off you student loans, and the payments are not insignificant (I have about 15K in loans with Sallie, and five years left in the fifteen-year repayment period. My monthly loan payment is more than my car payment). You can adjust your loan payment plan to make the individual payments smaller, but then you might be paying for the next thirty years.

If the amount of each payment will matter at all to you once you start working, and you can possibly get by without your car until you can afford to fix it with your own money, you should think twice about this.
posted by vorfeed at 4:01 PM on August 1, 2006

They just give you a check. If it gets dispersed through your aid office, they may only give you a check for the $ beyond tuition and fees, but books, housing, etc. are fair game.

And in my observation at U of I, so were Spring Break trips, large scale drug deals and small weddings, but I'd like to think karma eventually bites those people in the butt.
posted by Gucky at 7:46 PM on August 1, 2006

The total amount of your loans and other aid, private and otherwise, cannot exceed the total cost of education minus your expected contribution. Generally, the funds get sent to the school first, which certifies them and deposits them into your student account. The school then cuts you a check, and you can basically spend it on radios and moonpies for all they care.
posted by snickerdoodle at 8:12 PM on August 1, 2006

My experience as a grad student (at USC) was that the school's financial aid office actively interfered in the process. Sallie Mae agreed to loan me a certain amount, but USC didn't care; they wouldn't let me have all of it unless I justified to them why I needed it. I put a lot of time and energy into arguing with them, to no avail. Part of their ridiculous policy was that if you were an orphan, they'd let you have more money, because that implied that you were less likely to have someone else to help you out.
posted by bingo at 9:13 PM on August 1, 2006