The purpose of student loans is to help you pay for your education and future career, not to pay for a fancy lifestyle while you’re in school. It might be tempting to use that loan money to buy things you want right away, but keep in mind that every dollar you borrow today will cost you a lot more in the long run when interest adds up. Here are ten things you should never buy with your student loan money, along with better ways to spend it that will help you stay on top of your finances.
1. Gadgets and electronics that cost a lot
You might need a laptop for school, but don’t use loan money to buy the newest iPhone, gaming console, or other expensive electronics that have nothing to do with your studies. If you buy a $1,200 smartphone with loan money, it could cost you almost $2,000 in interest over the course of 10 years.
Smart choice: Look for student discounts, buy used devices, or use free computer labs and tech resources on campus.
2. Traveling and going on vacation during spring break
It might feel like a rite of passage to spend a week in Cancun, but if you pay for it with student loans, you’ll be paying for that trip for years to come. Travel costs can quickly add up to thousands of dollars, which is debt that has nothing to do with your education.
A better idea is to find cheap things to do in your area, on campus, or during breaks to make money for future trips.
3. High-end fashion and designer clothes
It’s important to build a wardrobe, but you should never buy designer clothes or luxury goods with borrowed money. When you add up the interest on the loan over time, that $300 pair of jeans costs more than $500.
A smart choice is to shop at thrift stores, use student discounts, and focus on building a useful wardrobe with high-quality basics that will last.
4. Eating out and food that costs a lot
Meal plans can be expensive, but regularly eating out or ordering delivery with loan money is a big mistake. Costs for food can add up quickly, especially if you have to pay interest on every meal for years.
A better option is to learn how to make simple meals, use the dining options on campus that are included in your meal plan, and look for free food events on campus.
5. Party Supplies and Alcohol
Not only is it financially irresponsible to use school money for parties or alcohol, but it could also break the terms of your loan. These things you buy don’t help you learn and can make your grades worse.
Instead of drinking, you could go to free social events on campus, join clubs with social activities, or find other ways to meet people and make friends.
6. Payments on cars and other expensive transportation
Some students need rides, but don’t use loan money to pay for a car, especially if it’s a nice one. It’s better to buy a used car that you can count on than a new car with high monthly payments.
Smart choice: Use campus transportation, public transit, a bike, or your own two feet. If you need to, you could also think about car-sharing services. If you have to buy a car, look for used ones that are in good shape.
7. Services for entertainment and subscriptions
Your loan money can go quickly on streaming services, concert tickets, movie theaters, and other fun things. Many subscription services may seem small on their own, but they can add up to hundreds of dollars a year.
A smart alternative is to use student discounts for entertainment, take part in free campus activities, share subscriptions with roommates, or look for free options like library resources.
8. Upgrades to homes that cost a lot
It’s okay to use loan money to pay for housing, but don’t use it to buy fancy apartments, expensive furniture, or upgrades that aren’t necessary. It’s not worth years of debt payments to live in the most expensive dorm or apartment complex near campus.
Smart choice: Look for cheap places to live, think about getting a roommate to help pay the bills, look into resident advisor jobs for free housing, or live at home if you can.
9. Gifts and things that aren’t necessary
It’s bad for your finances to use loan money to buy expensive gifts for family and friends or to buy yourself things like expensive jewelry, art, or collectibles. These things don’t help you learn and put you in debt for no reason.
A better option is to make your own gifts, give your time and effort instead of expensive ones, and wait until you have money to buy things you don’t need.
10. Paying off debts like credit cards
It might make sense to use student loans to pay off credit card debt or other loans, but this is often against the terms of the loan and turns debt that can be discharged into student loan debt, which is much harder to get rid of in bankruptcy.
A smart alternative is to talk to your creditors about payment plans, get financial advice from your school, look into part-time work to pay off other debts, or look into debt management programs.
What Student Loans Should Really Pay For
Remember, student loans are intended for legitimate educational expenses:
- Tuition and fees
- Required textbooks and supplies
- Reasonable room and board
- Transportation to and from school
- Basic computer and internet access for studies
If you borrow money you don’t need today, it will cost you a lot more in the future. If you have to pay off that $1,000 vacation with a student loan, it could cost you $1,400 to $1,500 more. More importantly, having more debt means higher monthly payments after you graduate. This can make it harder to find a job and put off big life goals like buying a house or starting a family.
Making good money habits now
During college, you can learn how to manage your money well, which will help you for the rest of your life. If you avoid these common spending mistakes and stay focused on your educational goals, you’ll graduate with less debt and more money to spend.
If you have a part-time job or family support, you might want to make a budget that separates your loan money from your other income. This helps you see clearly which costs are for education and which ones are for personal wants that you should pay for in other ways.
Last Thoughts
Student loans are not a way to pay for your current lifestyle; they are an investment in your future. If you are careful about how you spend this money and don’t buy things you don’t need, you will be better off financially after graduation. Keep in mind that the goal is to get as much education as possible while keeping your debt as low as possible. This will set you up for a better future with more money.
