You can use FAFSA money for expenses tied to attending your school: tuition and fees, on- or off-campus housing, food, books, required supplies and a computer, transportation to class, dependent care, and disability-related costs. When you signed the FAFSA, you certified that you would use the aid “solely for expenses related to attendance” at your institution.1Office of the Law Revision Counsel. 20 US Code 1091 – Student Eligibility Anything outside that boundary — a car, a vacation, credit card debt, an investment — is not what the money is for.
How the Money Actually Reaches You
Your school gets the money first. When grants and loans are disbursed, the financial aid office applies them directly to your student account to cover tuition, mandatory fees, and any on-campus housing or meal plan. You don’t choose that part. The school takes what it’s owed before anything else happens.
If your aid is larger than what the school charges, the leftover becomes a credit balance. Federal regulations require the school to send that balance to you within 14 days of the first day of class, or within 14 days of when the balance is created if it happens later in the term.2eCFR. 34 CFR 668.164 – Disbursing Funds Most schools pay refunds by direct deposit or prepaid card. That refund is the money you’ll use for rent, groceries, books, and everything else. It is not bonus cash.
Expenses You Can Cover
Tuition and Mandatory Fees
These come off the top and are the least risky category, because you never touch the money. Federal law defines cost of attendance to include tuition and fees normally assessed a student carrying a standard course load.3Office of the Law Revision Counsel. 20 USC 1087ll – Cost of Attendance Lab fees, technology fees, and campus health charges typically fall in here.
Housing and Food
If you live in a dorm with a meal plan, the school deducts those charges alongside tuition. Living off campus? Your refund is where rent, utilities, groceries, and renter’s insurance get paid. Federal law includes a living expense allowance in the cost of attendance for students enrolled at least half-time, covering food and housing whether you eat on campus, cook at home, or do some of both.3Office of the Law Revision Counsel. 20 USC 1087ll – Cost of Attendance
Two limits to keep in mind. Your school sets a dollar figure for what a student would reasonably spend, and anything above that figure is on you. And the allowance only applies to periods you’re enrolled, so aid generally won’t cover rent for a summer you aren’t taking classes.
Books, Supplies, and a Computer
The cost of attendance includes an allowance for books, course materials, supplies, and required equipment, plus a “reasonable allowance for the documented rental or upfront purchase of a personal computer.”3Office of the Law Revision Counsel. 20 USC 1087ll – Cost of Attendance Required software, a printer for assignments, and lab equipment your program expects you to own all qualify. Average annual book and supply costs for a full-time undergraduate run roughly $1,000 to $1,500.
Buy what your courses actually require. A laptop for schoolwork is fine. A top-of-the-line gaming rig you don’t need for class is where it stops being educational.
Transportation
Your school builds a transportation allowance into the cost of attendance for commuting between home, campus, and work. That includes transit fares, gas, and upkeep on a car you already own.3Office of the Law Revision Counsel. 20 USC 1087ll – Cost of Attendance It does not cover buying a car or motorcycle. The allowance is for getting to school, not for acquiring the vehicle.
Dependent Care
Students with children or other dependents can have a dependent care allowance added to their cost of attendance. It covers actual childcare during class time, study time, fieldwork, internships, and commuting, based on the number and ages of your dependents, and cannot exceed what’s reasonable locally for the type of care used.4Federal Student Aid. Cost of Attendance Budget Many students never hear about this one. If you have kids, ask the financial aid office to add it.
Disability-Related Costs and Professional Licensing
If a disability substantially limits a major life activity, your cost of attendance can include an allowance for special services, personal assistance, adaptive equipment, and related transportation, provided no other agency is paying for them.4Federal Student Aid. Cost of Attendance Budget If your program requires a professional license, certification, or first professional credential, the cost of getting it also qualifies. Nursing board exams and teaching certification fees are common examples.3Office of the Law Revision Counsel. 20 USC 1087ll – Cost of Attendance
What You Cannot Spend Aid On
The government doesn’t publish a line-by-line ban list, but the certification you signed draws a clear boundary: if it isn’t part of getting your degree, this money isn’t for it.1Office of the Law Revision Counsel. 20 US Code 1091 – Student Eligibility The common violations:
- Buying a vehicle. Keeping a commuter car running is covered; purchasing a car or motorcycle is not.
- Paying off credit cards or personal loans.
- Investing the money, whether in stocks, cryptocurrency, or anything else.
- Entertainment and luxury spending. Concert tickets, vacations, and designer clothing have nothing to do with enrollment.
The consequences are real. You can be required to return the funds immediately, lose eligibility for future aid, or face fraud charges if a pattern of intentional misuse is identified. Financial aid offices do sometimes audit how students spend their refunds, and the Department of Education can claw back money already disbursed.
Work-Study Money Is Yours
If your package includes Federal Work-Study, those dollars don’t move through the school’s disbursement process. You work a job and get a paycheck. That pay is yours to spend however you want, because it’s compensation for work, not aid subject to the attendance-expense rule. You can also ask your school to apply work-study earnings directly to your account for tuition or housing, though not every school offers that.5Federal Student Aid. 8 Things You Should Know About Federal Work-Study
The Tax Surprise on Grant Money
Something most students learn only at tax time: the portion of a grant or scholarship you use for room, board, or other non-tuition costs is taxable income. Only the amount applied to qualified education expenses — tuition, required fees, and course-related books and supplies — stays tax-free.6Internal Revenue Service. Publication 970 Tax Benefits for Education
Pell Grants follow the same rule. Pell money that pays tuition isn’t taxed; Pell money that pays your rent is.6Internal Revenue Service. Publication 970 Tax Benefits for Education Student loan proceeds are not income at all, because borrowed money creates a repayment obligation. If your grant aid exceeds your tuition, you may owe federal income tax on the difference even though you spent every dollar on allowable living costs. Track how your aid is allocated so it doesn’t blindside you in April.
Dropping Out or Dropping Below Half-Time
Withdraw from all your classes before you’ve completed 60% of the term and your school has to calculate how much aid you actually “earned” based on the percentage of the term you finished. The unearned portion goes back to the federal government.7eCFR. 34 CFR 668.22 – Treatment of Title IV Funds When a Student Withdraws
The math is a sliding scale. Withdraw at the 30% mark and you’ve earned 30% of your aid; the other 70% must be returned. Cross 60% and you’re considered to have earned all of it. The school handles returning its share from tuition credits, but you may personally owe money back for grant funds already refunded to you. That’s how students end up owing the Department of Education even though they never finished the semester.
Dropping individual classes while staying enrolled at least half-time usually doesn’t trigger a return calculation, but it can reduce your aid for the term. Federal aid is generally awarded based on at least half-time enrollment, so falling below that threshold can cause your financial aid office to recalculate your package downward.