You can use an unsubsidized student loan for any expense your school includes in its official cost of attendance. That covers tuition and fees, housing, food, books and supplies, a computer, transportation to class, personal costs, and a handful of less obvious items like childcare and licensing exams. So what can you use unsubsidized loans for in practical terms? Anything that keeps you enrolled and progressing in your program, up to the dollar figure your financial aid office has set for your budget. What you cannot do is buy a car, invest the money, or treat the refund as discretionary cash.
Cost of Attendance Is the Rulebook
The cost of attendance, defined in 20 U.S.C. § 1087ll, is the ceiling on everything. Your school calculates it each year using categories set by federal law: tuition and fees, housing and food, books and supplies, transportation, and miscellaneous personal expenses, plus optional add-ons like dependent care, study-abroad costs, licensing fees, and disability-related expenses.1Office of the Law Revision Counsel. 20 USC 1087ll – Cost of Attendance Your total aid from all sources, including the unsubsidized loan, cannot exceed that figure.
When your loan disburses, the school first applies the money to what you owe the institution directly, like tuition and on-campus housing. Anything left over gets refunded to you, usually within 14 days of the credit posting or the first day of classes, whichever comes later.2eCFR. 34 CFR Section 668.164 That refund is yours to spend on the other cost-of-attendance categories: rent, groceries, books, a bus pass. No one audits individual purchases, but the Master Promissory Note you signed obligates you to use the funds for educational expenses. Spending a refund on a vacation violates that agreement.
Tuition, Fees, and Required Health Insurance
Tuition and mandatory fees are the clearest use and the first thing deducted before you see a refund. Mandatory fees include enrollment charges, lab access, student activity fees, and technology fees. Course-specific charges for clinical rotations, art supplies, or field equipment also count.1Office of the Law Revision Counsel. 20 USC 1087ll – Cost of Attendance
If your school requires all students to carry health insurance and you don’t have comparable coverage elsewhere, the premium for the student health plan folds into your cost of attendance and loan funds can cover it.3Federal Student Aid. Cost of Attendance (Budget)
Housing and Food
Living expenses are usually the biggest line after tuition. Federal law splits them into housing and food allowances that depend on where you live.1Office of the Law Revision Counsel. 20 USC 1087ll – Cost of Attendance
Living on campus, your housing allowance is set at the average or median dorm charge, whichever is greater, and the meal plan allowance covers the equivalent of three meals a day. Both are usually billed directly through the school. Living off campus, your school estimates a standard housing allowance based on local rents for a single student, and that figure is meant to cover rent, utilities, internet, and phone. Groceries fall under the same three-meals-a-day food standard.
The catch is that your school’s estimate is the budget. If the off-campus housing allowance is $900 a month and your rent is $1,400, the extra $500 is yours to find somewhere else; loan funds can’t be stretched above the budgeted figure.
Books, Supplies, and a Computer
Textbooks, lab manuals, notebooks, calculators, and other course materials all sit inside the books-and-supplies allowance your school sets for your program. Engineering programs typically carry a higher allowance than humanities programs because the required equipment costs more.
A personal computer qualifies too. Federal guidelines allow a reasonable allowance for renting or buying a computer you’ll use for coursework, and you can purchase it before the term starts as long as it’s for that enrollment period.3Federal Student Aid. Cost of Attendance (Budget) Required software, peripherals, and telecommunications equipment for distance-learning courses are also included.1Office of the Law Revision Counsel. 20 USC 1087ll – Cost of Attendance
“Reasonable” is the operative word. A mid-range laptop that handles your coursework fits the standard. A top-tier gaming rig does not, and financial aid offices do occasionally ask questions when equipment purchases look out of proportion to a program’s needs.
Transportation
Transportation between school, home, and work is a recognized cost-of-attendance category.1Office of the Law Revision Counsel. 20 USC 1087ll – Cost of Attendance If you drive, loan funds can cover gas and routine maintenance. If you take transit, passes and fares qualify. The allowance can even reach program-specific travel such as conferences or residency interviews.3Federal Student Aid. Cost of Attendance (Budget)
One firm boundary: you cannot use loan funds to buy a car. The federal student aid handbook states that the transportation allowance covers operating and maintaining a vehicle used to get to school, not the purchase of one.3Federal Student Aid. Cost of Attendance (Budget) The same applies to leases. A car is a capital asset that keeps its value beyond your enrollment; gas and bus fare are consumed costs tied directly to attending class.
Personal and Miscellaneous Expenses
Federal law gives any student enrolled at least half-time an allowance for miscellaneous personal expenses.1Office of the Law Revision Counsel. 20 USC 1087ll – Cost of Attendance This is the catch-all. Clothing, laundry, personal hygiene products, and similar everyday costs that keep you functioning as a student all live here, with the dollar amount set by your school based on local conditions.
The line between “educational” and “personal” gets fuzzy in this category. A haircut before a required professional presentation is defensible. A weekend bar tab is not. No one is reviewing receipts, but the funds are meant to support your ability to stay enrolled and finish the program.
Dependent Care, Study Abroad, and Licensing Exams
A few expenses are called out specifically in the federal cost-of-attendance definition and matter a great deal to the students who need them.
- Dependent care. If you have children or other dependents, your cost of attendance can include a childcare allowance based on the number and ages of your dependents. The covered time is not limited to class hours; it extends to study time, fieldwork, internships, and commuting. The cap is the reasonable cost of care in your area.1Office of the Law Revision Counsel. 20 USC 1087ll – Cost of Attendance
- Study abroad. When your home institution approves a study-abroad program for academic credit, reasonable program costs, international insurance, and travel expenses can be built into your cost of attendance.1Office of the Law Revision Counsel. 20 USC 1087ll – Cost of Attendance
- Professional licensing and certification. For programs that require a license, certification, or first professional credential, the cost of obtaining it is part of your cost of attendance. That reaches nursing boards, the bar exam, the CPA exam, and comparable fees.1Office of the Law Revision Counsel. 20 USC 1087ll – Cost of Attendance
Disability-Related Expenses
Students with disabilities can receive a separate cost-of-attendance allowance for disability-related expenses not covered by other agencies, including special services, personal assistance, adaptive transportation, and specialized equipment or supplies. The school sets the amount, and it is added on top of the standard categories.1Office of the Law Revision Counsel. 20 USC 1087ll – Cost of Attendance Contact the financial aid office and disability services early, because the school needs documentation of the added costs before adjusting your budget.
What Loan Funds Cannot Cover
The simplest test: if it is not part of your cost of attendance and does not support your enrollment, it is off limits. Vehicle purchases top the list, as noted above. Investments, cryptocurrency, and stock trading sit clearly outside the scope. Down payments on property, vacations, entertainment subscriptions unrelated to coursework, and gifts do not qualify either. The Master Promissory Note requires that all funds go toward educational expenses, and violating that agreement can place your loan into immediate repayment or cost you eligibility for future federal aid.4Federal Student Aid. Direct Subsidized and Direct Unsubsidized Loans
Enforcement is rare for small deviations because schools do not track refund spending. Large, obvious misuses, like buying a car the week your refund lands, can draw attention. Keep receipts for major purchases made with refund money, especially computers, equipment, and licensing fees. Routine audits are uncommon, but documentation protects you if the school or the Department of Education ever asks.
Interest Accrues from Day One
Before you spend anything, know this: every dollar you borrow starts costing you interest the moment it disburses. With an unsubsidized loan you are responsible for interest during school, during your six-month grace period after you leave, and during any deferment or forbearance.4Federal Student Aid. Direct Subsidized and Direct Unsubsidized Loans Unpaid interest capitalizes, meaning it joins your principal and future interest is calculated on the larger balance.5Federal Student Aid. Annual and Aggregate Loan Limits
You can make interest-only payments while enrolled to stop capitalization. Most servicers set this up with small monthly payments, and even $25 or $50 a month toward accrued interest meaningfully lowers your eventual repayment cost. The practical lesson for spending: borrow only what your cost of attendance actually requires, and only for the categories above. Every dollar you take that you did not strictly need will cost more than face value by the time you pay it back.