Full Version: What's the deal with "education-related" expenses?
There's only a few questions about student loans I can't find with search. Lender websites usually say something about how the loan can only be spent on "education-related" expenses. How will they know this? Do I show reciepts or something, or do they monitor the account somehow?
I've never been asked to provide documentation on where I spend my financial aid. Is gas an educational expense? I drive to school, so you bet. Is rent an educational expense? I study at home, so you bet! I couldn't very well get an education with no place to live and nothing to eat. Obviously if you went straight out and bought a new tv, that isn't REALLY an educational expense (unless you have classes that require you to watch videos!! 
)
In my opinion there is a significant grey area of things that qualify as 'education related', and I doubt anyone would ever go so far as to have you verify your expenses or try to audit your purchases. Particularly if you get a refund check and go deposit it in your bank. If your money sits in a school account and they have to issue you a purchase order or something, then they'll force you to provide info before you can buy. But I don't think that is usually the case; I am always just handed a check for the amount of my loans beyond the cost of tuition. So far I don't know of anyone who has been asked anything about their financial aid spending.
ETA: Just wanted to add, I by no means condone maxing out student loans in order to buy new TVs.
) In my opinion there is a significant grey area of things that qualify as 'education related', and I doubt anyone would ever go so far as to have you verify your expenses or try to audit your purchases. Particularly if you get a refund check and go deposit it in your bank. If your money sits in a school account and they have to issue you a purchase order or something, then they'll force you to provide info before you can buy. But I don't think that is usually the case; I am always just handed a check for the amount of my loans beyond the cost of tuition. So far I don't know of anyone who has been asked anything about their financial aid spending.
ETA: Just wanted to add, I by no means condone maxing out student loans in order to buy new TVs.
QUOTE(dingdong @ Oct 20 2005, 02:57 PM)
There's only a few questions about student loans I can't find with search. Lender websites usually say something about how the loan can only be spent on "education-related" expenses. How will they know this? Do I show reciepts or something, or do they monitor the account somehow?
WEll, I've never had to actually document it...BUT I know, if I have to pay rent on my apt, so I'm not thrown out living on the streets and forced to drop out then, that's IMO considered education related (after all, I can't very well live in Corpus Christi, and go to school in Austin).
Again, I don't know the SPECIFICS, but I see it as anything that is necessary for you to be able to get to class, would be education related (gas, day care if possible--cuz you can't take your kid w/ you and you can't be in two places at once--etc). Basically pretty much all living expenses could be *considered* education-related (hey if my DD doesn't have diapers, I'll have to spend all day holding her over the toilet
).But don't just get the max you can, JUST because they offer it. I've done that, and so far I'm still on schedule to grad. owing what I planned..but I'm also figuring that based on no more unsub loans (I only have two), and hopefully/most likely I won't be taking the max sub loans either.
Almost anything could be education-related expenses.
New computer... classes require you to e-mail professors, write papers, etc...
New tv... some times a professor says to watch this video.
iPod... not kidding... if the professor of your music class said to listen to these songs...
But the real stuff they are aiming at is textbooks, housing, etc.
New computer... classes require you to e-mail professors, write papers, etc...
New tv... some times a professor says to watch this video.
iPod... not kidding... if the professor of your music class said to listen to these songs...
But the real stuff they are aiming at is textbooks, housing, etc.
Education related expenses are usually built into a school's 'cost of attendance'. This usually includes, tuition, room & board (estimated if you live at home or commute) books, parking, incidentals/personal and loan fees. Most schools will not allow you to borrow a signature/private loan that would put you over the cost of attendance.
Your budget may be different based on your program of study at your school, for example, first year nursing students may have a larger budget to allow for extra expenses related to their textbooks which can easily top $1,000. Most schools allow for a budget increase for extraordinary expenses. I have a friend whose DS is in a music program & was required by the department to purchase a professional sax. The school gave the student a budget increase of 5k to allow for the purchase.
I have never heard of a school requiring receipts or documentation other than if you ask for a specific budget increase. In my friend's case, his DS produced a memo from the Dept Chair that said students should allow between $3500 and $7200 for a professional instrument.
Your budget may be different based on your program of study at your school, for example, first year nursing students may have a larger budget to allow for extra expenses related to their textbooks which can easily top $1,000. Most schools allow for a budget increase for extraordinary expenses. I have a friend whose DS is in a music program & was required by the department to purchase a professional sax. The school gave the student a budget increase of 5k to allow for the purchase.
I have never heard of a school requiring receipts or documentation other than if you ask for a specific budget increase. In my friend's case, his DS produced a memo from the Dept Chair that said students should allow between $3500 and $7200 for a professional instrument.
Keep in mind, though, that if you want to deduct student-loan interest from your taxes in the future, the IRS has a much stricter definition of "educational expenses" than the ones mentioned here. For example:
QUOTE
Qualified education expenses do not include amounts paid for:
Insurance,
Medical expenses (including student health fees),
Room and board,
Transportation, or
Similar personal, living, or family expenses.
This is true even if the amount must be paid to the institution as a condition of enrollment or attendance.
Insurance,
Medical expenses (including student health fees),
Room and board,
Transportation, or
Similar personal, living, or family expenses.
This is true even if the amount must be paid to the institution as a condition of enrollment or attendance.
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