Funding education with student loans is extremely common, thanks to the high cost of earning a degree. But while it may be essential to borrow to pay for things like tuition and living expenses, there are some things it doesn't make sense to buy with loan money.
While I borrowed money to earn both my undergraduate degree and my law degree, there were four things I made sure never to spend my student loans on -- even as some of my peers splurged more than I was comfortable with. Here's what they are.
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1. Vacations
It was tempting to fund spring-break trips or trips home from school to see family with my student loans. But the reality is, student loans typically come with long repayment terms of a decade or more. It didn't make sense to pay for a vacation -- and incur interest costs -- for a 10-year period of time for a vacation that would be over in a week or two.
2. A car
Having transportation would have been very convenient while in school, but I wasn't willing to pay for a car with a student loan.
Like with a vacation, it didn't make sense to fund a vehicle purchase with a loan I'd be repaying for so many years. In fact, there was a substantial likelihood I'd still be paying my student loans even after the car got too old to drive, so I'd ultimately have been paying for a vehicle I no longer even owned.
If you can qualify for one, a car loan can be a better option than a student loan if you absolutely must borrow to buy a vehicle while in school. These loans have shorter payoff times and sometimes lower interest rates than student loans, so they can end up being more affordable.
Instead, you can do what I did: Rely on public transportation until you can afford to buy a car with cash or make car payments from your paycheck, rather than your loan checks.
3. TVs and video game systems
While I was in school, some of my friends bought televisions, video game systems, and other expensive electronics with their "extra" student loan funds. But this was something I wasn't willing to do. The technology would have been obsolete before the loans were paid off, and I know I would have regretted making this decision.
4. Dining and drinking at restaurants and bars
Finally, spending money on fancy restaurants and drinks at bars was another common thing people did with student loan money. While it makes sense to spend time making these types of memories in college, borrowing to do it isn't the best idea.
Every extra dollar of student loan payments can make it more expensive and difficult to pay back these loans later. A few drinks at the bar may not be worth having to wait to buy a house or start a family or begin saving for retirement because of lingering debt.
Ultimately, you are not supposed to spend your student loan money on these types of expenses. These loans are intended to be for educational costs only. While your lender isn't checking your bank account to make sure you didn't take a trip to the Bahamas with your loan funds, there's a reason that you're restricted to borrowing up to the cost of attendance.
You don't want to trap yourself in a ton of debt just to "enjoy" your college years, only to end up spending the next decade or two of your life struggling. I made the decision early on to borrow the minimum necessary for the essentials, and others who need to rely on student loans may want to do the same.
