Students add to personal debt with nonacademic activities

As loans go through financial aid each semester, students may find loan refund checks at their disposal, with money that seems free.

However, one way students can drag themselves further into debt is by borrowing more than they need for school — especially if they spend the extra money on luxury items.

Americans have around $1 trillion in outstanding student loans, according to a Consumer Finance Protection Bureau report, and total student loan debt exceeded total credit card debt in 2011.

According to the Ball State Office of Financial Aid, when a student’s loan goes through their bursar account, any money left over, after the semester is paid for, is either sent to the student by a check or a direct deposit to their bank account.

“The lure of getting loan money now through the federal programs, which do not require a credit check, can be hard to resist when repayment seems so far away,” said Rob Wirt, associate director of scholarships and outreach.

Federal Student Aid regulates that student loans are only to be used for education expenses, which can include supplies, transportation or the purchase of a personal computer.

But Wirt said what is appropriate can be a gray area.

“The cost of an education includes more than the basic costs of tuition and fees,” Wirt said. “Luxury items such as video games would not qualify, in most cases. What if a student is majoring in computer game design? Perhaps keeping up on the latest video games is essential for the student’s major.”

Sophomore computer science major Dante Payne took last Spring Semester off and used part of his student loan refund on a trip to Colorado.

Payne said he knows he misused the funds, but it was necessary because he was not working at the time.

“Most [of the portion of the check I spent] went to my trip to Colorado,” Payne said. “But even with all of that, I still have most of that money in an account I cannot touch so I can make payments on the loan once the bill starts coming in three years.”

There are no statistics on how often students use their extra loan money for noneducational expenses because the Department of Education cannot monitor how federal or private loans are used once the funds are released.

Wirt said the responsibility is on students, but the lure of luxury can be too enticing.

“Once the funds are disbursed to students, it is up to them to make good decisions and to use the funds wisely,” he said. “Our current ‘instant gratification’ society is also to blame a little for this — in general, people do not want to wait for things or save up for them.”

Ankit Patel, a sophomore, said he thinks people probably abuse loans.

“Government or school aid should only be used for school purposes whether it be room and board, tuition or school supplies, but nothing more,” he said. “I think most people want to be debt free and should stay focused on that”

Rushi Parikh, a senior finance and accounting major, agreed that this practice is not a smart financial move for the borrower.

“Financially, it’s not a smart move, but it’s debt they will have to pay back,” he said. “And if it’s private loans, they are welcome to do as they please with it. It’s not financially smart, but I don’t see how it affects other people.”