You can take out a student loan for living expenses, and both federal and private loans allow it. Every school builds a Cost of Attendance (COA) that includes housing, food, transportation, and personal costs alongside tuition, and you can borrow up to that full figure minus any grants or scholarships. Whatever is left after your loan pays tuition and fees comes back to you as a refund you spend on rent, groceries, and the rest of your day-to-day costs.
What Counts as a Living Expense
Federal law defines Cost of Attendance broadly, and those categories set the outer limit of what loan money can legitimately cover:
- Housing — on-campus room charges, off-campus rent, or a reduced allowance if you live with your parents. Your school sets a standard figure based on local costs or its own housing rates.
- Food — an on-campus meal plan or an equivalent grocery allowance for off-campus students, each based on three meals a day.
- Transportation — commuting, gas, bus passes, and travel tied to required program activities. Buying a vehicle is not allowed.
- Personal expenses — laundry, toiletries, and other routine costs your school includes in its standard student budget.
- Dependent care — care for children or other dependents during class, study, fieldwork, internships, and commuting, capped at the reasonable local cost.
- Disability-related costs — special services, personal assistance, adaptive equipment, and transportation not covered by other agencies.
- Books, supplies, and equipment — including a personal computer for coursework.
The housing and food figures follow specific rules. For students in campus housing, the school uses the average or median it charges residents, whichever is greater. For off-campus students, the school sets a standard rent and food allowance reflecting local costs. Students living with parents get a smaller but nonzero allowance, and military students receiving a basic housing allowance get a food allowance but no housing allowance.1Office of the Law Revision Counsel. 20 USC 1087ll – Cost of Attendance
Health insurance premiums are included in COA when the school charges them to all students as part of tuition and fees. If you have a disability, the school adds a separate allowance for disability-related expenses beyond what other agencies cover.2Federal Student Aid. Cost of Attendance (Budget)
How Much You Can Actually Borrow
Your school’s COA is the absolute ceiling on the total financial aid you can receive in a year, including loans, grants, scholarships, and work-study. Subtract every other form of aid from the COA, and the remaining gap is what you can cover with loans.1Office of the Law Revision Counsel. 20 USC 1087ll – Cost of Attendance
Say your COA is $30,000 and you receive $12,000 in grants. You could borrow up to $18,000 that year. Those funds first pay your remaining tuition balance, and the leftover comes to you as a refund for living expenses.
Your housing selection shapes the COA figure directly. Choosing off-campus housing on your aid forms generally produces a higher living expense allowance than living with parents. Report your actual arrangement accurately. Misrepresenting it to increase your borrowing creates problems with your financial aid office.
Federal Direct Loans then layer their own annual limits on top of the COA gap, and those limits are usually the real constraint.
Dependent Undergraduate Students
- First year: $5,500 total ($3,500 maximum subsidized)
- Second year: $6,500 total ($4,500 maximum subsidized)
- Third year and beyond: $7,500 total ($5,500 maximum subsidized)
- Aggregate limit: $31,000 across your undergraduate education
Independent Undergraduate Students
- First year: $9,500 total ($3,500 maximum subsidized)
- Second year: $10,500 total ($4,500 maximum subsidized)
- Third year and beyond: $12,500 total ($5,500 maximum subsidized)
- Aggregate limit: $57,500 across your undergraduate education
The subsidized portion is need-based and does not accrue interest while you’re enrolled at least half-time. The unsubsidized portion starts accruing interest immediately. For the 2025–2026 academic year, both subsidized and unsubsidized undergraduate loans carry a fixed rate of 6.39%. Graduate and professional students pay 7.94% on unsubsidized loans and 8.94% on PLUS loans.3Federal Student Aid. Interest Rates and Fees for Federal Student Loans
These caps apply to dependent undergraduates whose parents are not denied a PLUS loan. If a parent is denied, the dependent student qualifies for the higher independent limits.4Federal Student Aid. Annual and Aggregate Loan Limits
Graduate and professional students have their own separate and higher aggregate limits. Those limits recently changed under federal legislation effective July 2026, so confirm the current figures with your financial aid office or on studentaid.gov.
When federal limits fall short of your COA gap, parents of dependent students can apply for a federal Direct PLUS Loan, which can cover up to the full remaining gap. Private student loans from banks or credit unions are another option, though they lack the borrower protections of federal loans and typically require a credit check or cosigner.
How the Money Reaches You
Loan funds go to your school first, not to you. The financial aid office applies the money to tuition, mandatory fees, and any on-campus housing charges. If the loan exceeds those institutional charges, the leftover shows up as a credit balance on your account. That credit balance is what you use for rent and groceries.
Federal regulations require the school to pay you the credit balance as soon as possible, with two deadlines:
- If the credit balance is created after the first day of class, the school must pay you within 14 days of the date the credit appeared.
- If the credit balance is created on or before the first day of class, the school must pay you within 14 days of the first day of class.
Most schools deliver refunds through direct deposit or a mailed check.5eCFR. 34 CFR 668.164 – Disbursing Funds
Several things can push the refund past those 14-day windows. If you haven’t given the school bank account information, the refund defaults to a mailed check. First-time borrowers must complete entrance counseling and sign a Master Promissory Note before any funds disburse. Being selected for federal verification, where the school confirms the accuracy of your FAFSA data, can stall the whole timeline. Unpaid charges from a prior semester may need to clear before current-semester aid is released. Plan on having at least a month of living expenses saved before the term starts, because even under the best circumstances the refund rarely arrives on day one.
What You Cannot Spend Loan Money On
Loan funds are restricted to education-related expenses. Vacations, wardrobe upgrades, restaurant meals, home down payments, entertainment electronics, business investments, and paying off other debts are all off the list. Buying a vehicle is specifically prohibited, though gas, insurance, and maintenance for a car you already own are allowed as transportation costs.
The consequences for intentionally misusing loan funds are serious. Under federal law, anyone who knowingly obtains student loan funds through fraud or misapplies those funds faces a fine of up to $20,000 and up to five years in prison. If the amount involved is $200 or less, the maximum penalty drops to a $5,000 fine and one year of imprisonment.6GovInfo. 20 USC 1097 – Criminal Penalties
Casual overspending on takeout is unlikely to trigger an investigation. Deliberately inflating your housing selection to get a larger refund for prohibited spending, or taking out loans for classes you never intend to attend, crosses into fraud. If an expense isn’t related to your education, don’t pay for it with loan proceeds.
Asking for More When Your Costs Exceed the Budget
If your real living costs run higher than the school’s standard COA, you can request an adjustment through a process called professional judgment. A financial aid administrator has the authority to raise your COA on a case-by-case basis when you can document expenses beyond the standard allowance. Common reasons include:
- Unusually high childcare or dependent care costs
- Disability-related expenses not captured in the standard budget
- A required professional license or certification
- Program-specific expenses above the standard tuition and supply estimates
Contact the financial aid office after filing the FAFSA and receiving your initial aid offer. You’ll usually submit a written appeal with supporting documentation such as receipts, lease agreements, childcare invoices, or medical records. The office reviews each case individually, and their decision is generally final.
A COA increase doesn’t automatically put more money in your pocket. It raises the ceiling on what you can borrow. You still have to take out additional loans (or receive additional grants) to access the funds, so weigh whether the extra interest is worth it.
The Real Cost of Borrowing for Rent and Groceries
Every dollar you borrow for living expenses is a dollar you’ll repay with interest long after the rent is paid. At the current undergraduate rate of 6.39%, a $5,000 refund spent on one semester’s living costs will generate roughly $2,000 in additional interest over a standard 10-year repayment plan. Across four years of borrowing, that compounds.
Before maxing out your loans for living costs, look at what would shrink the gap. Work-study positions, part-time jobs, and resident advisor roles that include free housing all reduce how much you need to borrow. Trimming $1,000 per semester can save several thousand dollars in total repayment. Take what you need, not the maximum offered. You can request additional funds later in the term if your circumstances change.