Student-loan providers often approve borrowers for an amount that’s higher than the cost of tuition and associated costs like books. This can seem like found money, especially for financially strapped students, but using student loans for living expenses can give you a financial headache that lasts well beyond graduation.
“Take out loans on only what you need for books and tuition,” advises Cristy Cash of the Consumer Credit Counseling Services of Central Oklahoma.
By some indication, college students are fairly likely to use student loan money for beer and clothes rather than their education. Unlike other unsecured loans like credit-card debt, student loans are extremely difficult to discharge in bankruptcy, which means you could be paying off — and paying interest on — those trips to the mall and late nights of partying long after graduating. (Assuming you manage to graduate, that is.)
Borrowing more than you need — especially when it comes to private student loans, which have come under fire from advocacy groups for high costs and poor terms — can cause problems for decades.