As this website has already discussed, individuals should do everything they can to minimize the amount of student loans they borrow. This is because student loans typically have high interest rates and can be an impediment to achieving a number of financial goals. However, individuals are usually allowed to borrow student debt for living costs in additional to educational expenses. Indeed, many schools typically issue students a check containing funds that are supposed to be used for living expenses and other incidental costs. Although there are legal and moral issues involved, using student loans for other purposes is doable in a variety of circumstances.
In my own life, I tried to borrow the least amount of student loans possible while I was in school. I worked a number of jobs as an undergraduate and law student, so I did not need to take out loans to cover too much of my living expenses. However, I usually made sure that I had a cushion of money available in case I needed to spend cash for a variety of purposes as a student.
The first time I considered using student loans for other purposes was when I was in law school, and I had some medical issues. Although the situation was extremely trivial, I ended up amassing a few thousand dollars of medical debt, since my student health insurance didn’t cover the full cost of my medical expenses. I was worried that if I did not pay for these medical costs, it could affect my credit, which in turn could hurt my ability to finance my education with additional student loans.
By using student loans for other purposes, I was able to fully pay off my medical expenses. This meant that I had less funds available to pay for living costs, but this encouraged me to work harder at my work-study jobs and be more frugal with how I spent my money. Eventually, I was able to break even by working a lucrative job during the summer after my second year of law school, and using student loans for other purposes did not have too much of an effect on my student debt burden.
There was another time that my brothers and I considered using student loans for other purposes. While one of my triplet brothers and I were still in school, a member of my family needed money quickly to pay for a one-time cost. It was difficult for this family member to borrow money on his own, since his credit score was not solid, and he had experienced financial issues in the past.
Even though my brother and I were living on modest budgets as students, we decided to lend our family member some money. Since most of the money we had came from funds we borrowed for living expenses while in school, this had the effect of using student loans for other purposes. Our family member was able to eventually repay us all of the money we had borrowed while we were still in school, so lending this money did not have a massive effect on our bottom lines.
These are good examples of when using student loans for other purposes makes sense. However, there are a number of times when it is not reasonable to use student loan money to finance other pursuits. It can be appealing to use cash that you have available, even if it is borrowed money, but you should avoid spending this money on unneeded things if possible.
For instance, I had a classmate who borrowed the maximum amount of student loans possible to attend law school, such that he had a significant amount of money in his bank account for living expenses. Rather than use this money to pay for housing, food, and such, my friend took a number of vacations and splurged on all manner of luxury items, including gaming consoles, fancy meals, and the like. My friend had a number of experiences by spending money in this way, but he has been paying back all of this cash with interest. There is an old saying that you should live like a student now so you can live like a professional later, and this is a good maxim to live by when you consider using student loans for other purposes.
Sometimes, it is less clear about whether it makes send to think about using student loans for other purposes. For instance, I know someone who has been plagued by credit card debt since she was a young adult. Her family was going through a rough time while she was a teenager, and she chipped in by buying groceries and other essentials for her family on her credit cards.
This friend of mine had amassed a massive amount of credit card debt while she was in graduate school that had an interest rate well into the double digits. However, she borrowed student loans that had an interest rate that was lower than this. As a result, she borrowed the most student debt possible and used any money she had available for living expenses to pay down the credit card debt. So long as this is legal and moral, this seems like a solid way to pay off high-interest debt.
In the end, there is always going to be a temptation to spend available money. So long as you keep a few things in mind, using student loans for other purposes is advisable in a number of situations.