Almost all students experience money-related stress during college. They commonly ask if they can use student loans for living expenses.
The answer is simple, yes you can use student loans for living expenses, but you absolutely shouldn’t. Using student loans as personal loans to pay for living expenses is a common trap, that just leaves college students with greater debt and regret.
Most Students Struggle With Living Expenses
Going to college is expensive and most students stress about money all the way through. The cost of tuition, housing, books, supplies, food, and everything in between is going up.
At some point, most students worry that they don’t have enough money to pay for emergency car repairs, next month’s rent, or even for their next meal. This is when they typically fall into the trap of using student loans for living expenses. If they take more student loans, they won’t have to worry about these things, right?
A large number of students even start to use student loans as an excuse to live above their means. This is even more common with young married students, who tend to copy the lifestyle of their parents.
You might often see a formerly struggling student live beyond their means or a student couple who are magically able to afford ‘necessary expenses.’ They will literally have to pay for it later if they are using student loans for living expenses.
Economic Anticipation Helps Justify Loans
Many students anticipate that they will see a huge hike in their income when they land their first job, or that they will generally turn out to be a success in their careers and adult life. This economic anticipation helps them justify taking student loans for personal or living expenses.
They think that since the interest rate is so ridiculously low (at least for now) and they will earn so much money imminently, they can pay off student loans quite easily in no time. They do not consider the consequences of additional student loans, how it affects their credit score, their future job market, etc.
Avoid The Trap
College students can avoid the trap of using student loans for living expenses with some traditional personal finance strategies. Start by creating a safety net of a month’s expenses.
This safety net will prevent you from the temptation of taking on more student loans for living expenses or any emergency or personal expenses. Then, create a personal budget and stick to it.
Keep track of all the money that comes in and goes out. Review your budget every week to see where you can save more. If expenses become unmanageable, consider taking a semester off to create a bigger safety net.
Taking on more student loans to pay for living or personal expenses is perhaps one of the worst financial decisions you can make as a student. Your objective should be to take on as little debt as possible and pay it off as quickly as possible. If you treat student loans as a safety net or buffer for your living expenses, you will certainly regret it later in life.