Some schools give students more freedom -- and more responsibility -- to manage their costs with financial aid. The students are supposed to use the money from financial aid to cover expenses such as tuition, books, transportation, and room and board. But if the student chooses to spend the money elsewhere, he or she will encounter problems later on once there are bills to pay.
Many schools limit the amount of financial aid any single student can receive. This prevents a student from receiving more aid than what is necessary to pay for a college education. But students who win grants and scholarships from multiple sources may find themselves in possession of more money than they need for basic costs.
It's a big mistake to dedicate this money to short-term desires. Using financial aid money to cover costs unrelated to school can lead to trouble down the line. This is particularly true for student loans.
Recipients of student loans must repay the loan with interest. Many student loans have a grace period of six months after graduation before requiring the student to begin payments. Because the student must pay the loan institution more money than what he or she received as financial aid, it's best to restrict the size of the loan request to the bare minimum. Larger loans will be harder to repay.
For that reason, it's not a good idea to spend loan money on non-necessary expenses. If you receive more money than what you need to cover your school costs, it's a good idea to put the extra money toward repaying the loan.
Students should create a spending plan and stick to it. The plan should take into account when the student will receive money through financial aid and other sources, and it should also include necessary expenses plotted out through the course of the year. This will help the student stay ahead of financial obligations and avoid falling into the trap of spending money on frivolous things.
Financial aid can be difficult to secure. Once you do receive financial aid, be careful to spend it wisely on what matters most.
For more on financial aid and other related topics, take a look at the links below.
Related HowStuffWorks Articles
- Clark, Kim. "Students Make Costly Mistakes With Financial Aid." U.S. News & World Report. July 29, 2008. (Jan. 6, 2010) http://www.usnews.com/articles/education/2008/07/29/students-make-costly-mistakes-with-financial-aid.html
- Humboldt State University. "Frequently Asked Questions." (Jan. 6, 2010) http://www.humboldt.edu/~finaid/parents/faq.html#28
- Pappano, Laura. "The Fallout." New York Times. Dec. 23, 2008. (Jan. 6, 2010) http://www.nytimes.com/2009/01/04/education/edlife/spending-t.html
- Vazquez, Jose. "So You Got Your Financial Aid, Now What?" Young Money. May 29, 2005. (Jan. 4, 2010) http://www.youngmoney.com/credit_debt_faq/041019/