Q: I am in college and would like to purchase a car. Is it okay to get a student loan to buy a car?
A: Strangely, the question of using student loan funds to buy a car, actually comes up quite often. The topic of what you can or can not spend your student loans on (or are supposed to spend your student loans on) is pretty popular. This question most likely arises because banks and credit unions are unlikely to grant auto loans to college students because of their lack of income during school. With that being said, unfortunately student loans are not intended for purchasing a car. Federal student loans are intended for educational related expenses only, and using this money on non educational related expenses would be a violation of the terms.
Private student loans are also intended for educational purposes only, however some make the case that “transportation” is an educational related expense. If you feel your purchase of a car is a justifiable educational related expense, calling your private student loan lender to make certain you are not in violation of your promissory note would be a good idea. Remember the key to student loans, is to have as few of them as possible. You should never have more total student loan debt, than you will make your first year in the workforce after college. Purposely getting a student loan with the intention to purchase a car would be a financial mistake that could negatively impact you for years to come.
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