Could I use a federal student loan to pay for a used car?
I am currently a freshman attending a community college, and applied for Stafford loans. Because my mom didn’t qualify for the Parent Plus Loan, I qualify for the independent amount, which is $9500 (between subsidized and unsubsidized). It’s extremely difficult for me to get to my school since it takes forever, and a car would be extremely helpful. I would DEFINITELY buy a used one, probably one that would not cost over $3000. I don’t need an amazing car, just something that works. I would also pay off my insurance for the year (About $1200), and save the remaining money (about $4000 after registration and such) to help with next year’s tuition at a university. I am a minor, and my mother doesn’t have good credit at all (hence her not qualifying for the Parent Plus Loan), so I cannot just buy a car the regular way. My question is, is this possible?
No, it’s not a good plan.
Why? Because you only get half that loan money per semester (minus the loan origination fees) and because the money goes to the school first to pay for your tuition and fees.
So, if you qualified for 9,500 a year then you’d only get 4,750 per semester. If your tuition and fees and books and loan fees are 2,500 a semester then you’d only have 2,250 left over. If you have to pay 1,200 in insurance then that only leaves you 1,000 for the car. That isn’t going to get you a very good car and when it breaks down (which it will) you will have no money to get it fixed.
Even if its taking you forever to get to school, you are getting there… don’t put yourself $9,500 in debt for the PROMISE of a broken down used car sitting in your driveway that is worth less than 1,000.
