Lana Oconnell
Unsubsidized student loans are federal loans offered by the US Department of Education to both undergraduate and graduate students, regardless of financial need. They are typically taken out by students who don't qualify for subsidized loans, and they start accruing interest as soon as the loan is disbursed. So, what expenses can you pay with an unsubsidized student loan? You can use the funds to cover eligible school expenses, such as tuition, room and board, meal plans, and other fees. Any leftover money can be used for expenses like transportation, study abroad costs, technology, personal costs, professional expenses, disability needs, and childcare. However, it's important to remember that unsubsidized student loans come with interest, so you should only borrow what you need and consider paying off the interest during your studies to prevent your principal from growing.
| Characteristics | Values |
|---|---|
| Interest | Interest starts accumulating from the date of the first loan disbursement. |
| Interest Rate | The interest rate for unsubsidized Stafford loans made to graduate students is 7.94%. Interest rates for unsubsidized loans are roughly 1.5 percentage points higher than those for subsidized loans. |
| Eligibility | Undergraduate and graduate students are eligible. Students must be enrolled in school at least half-time. |
| Expenses Covered | Transportation, study abroad, technology and equipment, personal costs, professional expenses, disability needs, and childcare. |
| Non-Eligible Expenses | Non-school services, entertainment, clothing and shopping. |
| Repayment | Students can choose to pay the interest or allow it to accrue and be capitalized. |
| Grace Period | Six months before repayment is required. |
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What You'll Learn
Transportation
Students who live off-campus may have their transportation allowance calculated by multiplying the distance from campus by the IRS mileage rate, which includes costs such as gas, oil, tires, maintenance, repairs, insurance, registration, and licenses.
In the case of students with disabilities, transportation costs related to their specific needs may also be covered by student loans. This could include the cost of a shuttle service provided by the school for students with disabilities.
Additionally, transportation costs for study abroad programs or cooperative education programs can be covered by student loans. This includes transportation to and from the program site, as well as any necessary field trips or day trips as part of the program.
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Study abroad
Studying abroad can be a life-changing experience, but it can also be expensive. The good news is that you can use unsubsidized student loans to help fund your trip. Unsubsidized loans are available to all undergraduate and graduate students and are not based on financial need.
Tuition
Tuition fees are usually the largest college cost. This price may vary depending on the school you choose and how long you plan to study there. Federal student loans can be used to pay for any qualifying educational expenses.
Travel fees
Travel expenses can also be covered by financial aid and student loans.
Living expenses
You will also need to consider the cost of living, such as rent or room and board, food, and household items. These fees can add up, and you may need to borrow to pay for them.
Books, fees, insurance, and other school-related expenses
Other education-related expenses, such as books, fees, insurance, and transportation, can also be covered by loans.
It is important to note that the application process for study abroad student loans may vary based on the loan type and lender. Federal student loans typically require completing the Free Application for Federal Student Aid (FAFSA). Private student loans, on the other hand, are credit-based and may require a co-signer if you do not have a strong credit history.
Before taking out any loans, it is advisable to do extensive research and consider all your options, including scholarships and grants, which do not need to be repaid. Additionally, explore affordable study abroad programs to minimize costs.
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Technology and equipment
Additionally, if you require specific technology or equipment for a course, such as specialized software or a particular type of calculator, these could also be considered qualified education expenses. It is important to note that the technology and equipment should be primarily for educational purposes and used by the enrolled student.
Other course-related expenses, such as fees, books, and supplies, are also typically covered under qualified education expenses. These may include textbooks, notebooks, pens, book bags, and other school supplies. However, it is always a good idea to consult your school's financial aid office or refer to their list of approved costs to ensure that your technology and equipment purchases are eligible for coverage under your unsubsidized student loan.
While technology and equipment can be covered, it is important to remember that there may be restrictions on using your loan for certain items. For example, clothing, entertainment, and non-essential personal expenses are generally not considered eligible expenses. It is also important to be mindful that you will need to repay any money borrowed, so it is recommended to prioritize essential expenses and avoid unnecessary spending.
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Personal costs
Student loans can be used to cover a range of personal costs, including living expenses. These expenses include rent, utilities, and groceries, as well as other costs necessary for your personal needs. For example, personal hygiene products and personal care necessities like toiletries are covered.
Additionally, student loans can be used to cover costs related to a disability. This includes personal assistance services and any equipment or supplies needed, except for major, high-cost medical equipment. If you are a parent, you may be able to use your loan to pay for childcare while you are in classes, but this should be checked with your financial aid officer first.
It is important to note that there are restrictions on what student loans can be used for. For example, you cannot use a student loan to purchase a vehicle, even if it is for commuting to school. Student loans are intended for education-related costs, so using them for non-essential purchases can lead to unnecessary debt and make repayment more challenging.
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Professional expenses
Unsubsidized student loans can be used to cover a range of professional expenses essential for your education. These expenses can include:
Professional Testing, Licenses, and Certification
You can use your loan funds to pay for any professional tests, licenses, or certifications that are required for your course or field of study. This can include expenses such as exam fees, licensing fees, or certification costs.
Study Abroad Costs
If you plan to spend a semester or year abroad as part of your education, your unsubsidized student loan can help cover those costs. This includes expenses such as travel, accommodation, and any other fees associated with your studies abroad.
Technology and Equipment
You can use your loan to purchase technology and equipment necessary for your classes. This can include a laptop, software, or any other specialised equipment required for your course.
Transportation
Transportation expenses, such as gas, parking fees, bus passes, or other commuting costs to get to and from your school or places of education, are also covered.
Disability Services
If you have any disability needs, your loan can help cover the costs of specialty services, equipment, and supplies required to support your educational pursuits.
Childcare
For single or working parents, your loan may be used to pay for childcare while you attend classes. However, it is always a good idea to check with your financial aid officer to ensure that these expenses are covered by your specific loan.
It is important to remember that unsubsidized student loans are meant to cover essential education-related expenses. While you have flexibility in how you allocate the funds to suit your specific needs, non-essential expenses, such as entertainment, dining out, or clothing, should be avoided. Always refer to your school's financial aid office or a professional financial advisor for guidance on allowed expenses and to avoid any penalties for misuse of loan funds.
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Frequently asked questions
You can use your unsubsidized student loan for any eligible school expenses. This includes transportation, study abroad, technology and equipment, personal costs, professional expenses, disability needs, and childcare.
You cannot use your unsubsidized student loan for non-essential purchases such as entertainment, clothing, and non-school services.
The main difference between subsidized and unsubsidized student loans is that interest is charged on unsubsidized loans during in-school, deferment, and grace periods, whereas subsidized loans do not charge interest during these periods.
