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Is a student loan a type of loan or just a generic name used to refer to a loan for someone who is going back to school?

I am planning to go back to school and picking up living expenses by living off campus and I was thinking that I could clump student fees and the living expenses into a loan to create a monthly cost factored in over more years then I would be in school.

If a student loan is a different type of loan, does it only cover the costs of going to the school?

EDIT: This is in the US.

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Student loan is a class of unsecured loan. The characteristics that define a student loan are, primarily, that it is a loan that is intended to be used by someone who is currently a student. Beyond that, though, there are many variations.

The different kinds of requirements usually have to do with who is eligible for the loan, and with what the loan is allowed to be used to pay. Some loans have other limitations, such as only being allowed to be directly paid to the institution.

Some student loans are federally guaranteed (meaning the Federal Government will repay the bank if you default). Those have a lower interest rate, typically, and often have more stringent requirements, such as only full-time students being eligible, being need-based, and limitations on what the loan's funds can be used for. See studentaid.ed.gov for more information.

Many private student loans have quite lax limitations. Some for example have nearly no limitation as to what they can fund; many are allowed to be taken out by part-time students and even non-degree-seeking students in some cases. Private loans usually have somewhat higher rates (as they're entirely unsecured) to go along with the lower restrictions and higher borrowing limits. You'd have to see the specific details of any particular loan to know what it's allowed to pay for, so if you choose this route, know what you plan to use it to pay for before you go looking.

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Is a student loan a type of loan or just a generic name used to refer to a loan for someone who is going back to school?

A student loan from the federal government is a specific type of loan used for education purposes (i.e. attending college). They have guidelines associated with them that are very flexible as compared to a student loan from a private bank.

If a student loan is a different type of loan, does it only cover the costs of going to the school?

Every student at a university has a "budget" or the "cost of attendance". That includes direct and indirect costs. Direct costs are ones billed directly to you (i.e. tuition, room and board - should you choose to live on campus, and associated fees). Indirect costs are such things like books, travel expenses (if you live out of state), and personal things. Direct costs are controlled by the school. Indirect costs are estimated. The school will usually conduct market research to determine the costs for indirect items. Some students go above that, and some go below. For example, transportation is an indirect cost. A school could set that at $500. There are students who will be above that, and some below that. If you choose not to live on campus, then rent and food will become an indirect cost. Student loans can cover up to 100% of your budget (direct and indirect added together). If your total budget is $60,000 (tuition, room and board, transportation, books, supplies, etc.) Then you are able to borrow up to that amount ($60,000). However, because your budget is both direct and indirect costs, you will only be billed for your direct costs (tuition, etc.). So if your direct costs equal $50,000 and your student loan was certified for $60,000, then you will get that $10,000 back in the form of a refund from the school. That does not mean you don't have to pay it back - you still do. But that money is meant for indirect costs (i.e. books, rent - if you're not staying on campus, etc.). If your school is on semesters vs quarters, then that amount is divided between the terms. Summer term is not factored in, that's another process. Also with student loans, there are origination costs - the money associated with processing a loan.

A good rule of thumb is to never borrow more than you need.

Source: I used to work in financial aid at my college.

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The short answer is that you can use student loans for living expenses. Joe provides a nice taxonomy of loans. I would just add that some loans are not only guaranteed, but also subsidized. Essentially the Government buys down the rate of the loan.

The mechanics are that a financial aid package might consist of grants, work study (job), subsidized, and guaranteed loans. One can turn down one or more of the elements of the package. All will be limited in some form.

The work study will have a maximum number of hours and generally has low pay. Many find better deals working in the businesses surrounding the college or starting their own services type business. The grants rarely cover the full cost of tuition and books. The loans will both be limited in amount. It mainly depends on what you qualify for, and generally speaking the lower the income the more aid one qualifies for.

Now some students use all their grant, all their loan money and buy things that are not necessary. For example are you going to live in the $450/month dorm, or the new fancy apartments that are running $800/month? Are you going to use the student loan money to buy a car? Will it be a new BMW or a 8 year old Camary?

I see this first hand as I live near a large university. The pubs are filled with college students, not working, but drinking and eating every night. Many of them drive very fancy cars.

The most onerous example of this is students at the military academies. Attendees have their books and tuition completely paid for. They also receive a stipend, and more money can be earned over the summer. They also all qualify for a 35K student loan in their junior year. Just about every kid, takes this loan. Most of those use the money to buy a car. I know a young lady who did exactly that, and so did many of her friends.

So kids with a starting pay of 45K also start life with a 35K. Buying a nice car in the military is especially silly as they cannot drive it while deployed and they are very likely to be deployed. At least, however, they are guaranteed a starting job with a nice starting pay, and upward potential.

College kids who behave similarly might not have it as good. Will they even find work? Will the job have the ability to move up? How much security is in the job? One might say that this does not apply to engineers and such, but I am working with a fellow with a computer science degree who cannot find a job and has not worked in the past 6 months. This even though the market is super hot right now for computer engineers.

So, in a word, be very careful what you borrow.

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Short answer: student loans are loans given to people that are currently enrolled in school and yes, you can use them for personal expenses.

Long answer: be very careful because you can easily be financially ruined if you borrow too much and can't repay it quickly. Once the loans get beyond a certain size relative to your income, you can find it hard to stay ahead of the interest payments let alone actually pay off the principal. These are the facts you need to know:

  • Student loans tend to have high interest rates. My wife has a mix of 0 percent, 3.5 percent and 6 percent loans. Mine are all 7 percenters. This was after refinancing.
  • Student loans capitalize interest and they do it constantly, even when you're not obligated to pay back the loan. While you're in school, your loan will be growing in size from the day you enroll until you graduate. I borrowed 60k for three years of law school and had a balance over 70k when I graduated. Student loans also grow due to interest if you have an unemployment deferral, go on IBR, stop paying, default, etc.
  • They are practically forever unless you repay them. Student loans are not discharged in bankruptcy court. So you can be completely and totally ruined financially, but you will never get out from under them. They will grow and grow, basically forever. If you ignore them and don't use the various alternatives to default (IBR, deferrments, etc), you will eventually default and they will start garnishing your paychecks and generally coming after any assets you have.
  • If you repay under IBR for 25 years (during which time your loan balance will continue to grow), they will (in theory, if congress doesn't change the rules again in the next 25 years) be forgiven... which counts as income to the IRS. Now if you're insolvent at this point you're fine... but if you're not- the IRS will be coming after you for a huge chunk of change.

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