The high cost of higher education means that many people need to borrow money to pursue their dreams. In the 2014-2015 school year, about 34 percent of financial aid dollars awarded to undergraduates came in the form of federal loans, according to the College Board, a not-for-profit organization connecting students to college success and opportunity. However, that money is attached to some pretty serious strings.
When you sign a student loan, not only do you have to repay it, but you also have to pay interest. Federal student loan money is intended only for your educational expenses, such as tuition, room and board, fees, books, dependent child care expenses, transportation and the rental or purchase of a personal computer.
In some cases, students have money left in their accounts after official school charges have been paid. If the amount of your student loan is greater than the amount of the charges, then your school will send you a check for the balance or deposit that money in your bank account. Too often, students don't consider the long-term financial consequences of spending this "free" money.
"Over a total of six years in college, I probably received around $15,000 to $20,000 in financial aid proceeds over the amount required to cover tuition and fees," said Kelby Green, owner of digital marketing agency Common Cents Content & Marketing. "And although I knew better, I treated these financial aid 'refunds' like free money and spent most of it on frivolous purchases, like clothes, a nicer-than-I-deserved apartment and going out."
Here are six dumb ways that people spend their student loan money. Find out how to save money on college costs without resorting to your student loans.