What Kind of Expenses do Student Educational Loans Cover?

Most schools also use the EFC and COA to determine your eligibility for institutional aid as well...but not always. Your need for financial aid is determined using the following formula: COA minus EFC equals Need. Even though the EFC generally remains the same for all schools, the COA changes. Therefore, your need can change based on which school you attend.

What is EFC and COA? 
Expected Family Contribution (EFC) - the amount your family is expected to contribute toward your education. This amount is determined by the information you submit on the Free Application for Federal Student Aid. Because this figure is calculated using a formula, it generally does not differ from school to school.

Cost of Attendance (COA) - the amount it will cost you to attend a specific school. This figure can be radically different from school to school because of the different costs of attending a community college, public institution, or private institution.

What Kinds of Costs are Included in the COA?
The COA can differ from school to school but the components that make up the COA are generally the same. The following COA components are mandated by law for federal aid programs:

• Tuition and fees
• On-campus room and board or an allowance for housing and food off-campus
• Books, supplies, transportation, and loan fees
• Allowance for miscellaneous and personal expenses (plus an allowance to rent or buy a personal computer)
• Other costs, which can include disability-related costs and dependent care for students with dependents

Expenses for eligible study-abroad programs can also be included at the discretion of the school. Discuss any extraordinary expenses you may have with your financial aid office.

Can You Use Your Financial Aid to Pay Expenses?
You can use your financial aid as well as any educational loan proceeds to pay for any of the COA components. Many schools credit your financial aid each term directly to your account with the school, using the funds to pay charges assessed to you by the school for that term (for example, tuition & fees, room & board, etc.) and only give you any funds that are left over.

Should You Pay Off Credit Cards with Your Student Loan?
If you can prove that you used your credit card to pay allowable COA expenses, you might be able to make a case, but credit card expenses themselves are not allowable expenses that can be covered by financial aid or loan proceeds.

What if You Have Expenses Not Covered Here?
You can always discuss other expenses with your school's financial aid office. Some schools have the funding to make discretionary choices but many more do not. You should always discuss any problems or special circumstances with your financial aid office. Even if they cannot provide funding, they may be able to offer other solutions.

Source:
U.S. Department of Education
Guide to Federal Student Aid 2007-08

About the Author:
Judi Sandall is a graduate of the State University of New York, with a BA in English Literature. She is a technical writer and editor who worked in student financial aid for over 20 years.