If you are attending college and are using federal loans to help pay for your education then there is a good chance that you are going to receive a check. This check will be your left over funds that you did not need. Legally, there are certain ways that this money is intended to be spent.

Education Related Expenses

Any money that is left over and disbursed to you must be spent on education related expenses. You could buy a new computer or you could use the money to put gas in your car to commute to and from school.

Entrance Exam

Before any funds will be dispersed to your school by your lender you must take an entrance exam. This is a quick summary followed by a quiz that provides you with all the information about your student loan including interest rates, how much you can borrow, how to pay it back, and what you are allowed to spend it on.

No Vacations

When you borrow the money you are entering into a contract. If the lender discovers that the money was not used for what it was intended they can terminate the loan immediately. For example, if they discovered that you took a luxury vacation.


Some lenders will allow borrowers to utilize their student loans for a car provided the car is essential in providing transportation to get to school.

Off Campus Expenses

Some lenders will also allow students to use student loan money for off campus living. This would then mean that rent could be paid with student refunds.

Kinds of Loans

A student can only receive a refund check from the loan portion of their money. This could be from a federal or private source. Federal loans include subsidized and unsubsidized Stafford loans, Parent Plus loans, and Perkins loans. All federal loans have the same core regulations as far as what the excess funds can be used for which must always be education related expenses.

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