Can I Get a Student Loan for a Car?

Student loans provide young people the financing they need to obtain a post-secondary degree. These loans may be issued by a private lender, like a bank or credit union, or directly by the federal government. Irrespective of the source of the money, student loans are intended to support learning and so in most cases proceeds cannot explicitly fund the purchase of a new vehicle.

Student Loan Proceeds

Student loan proceeds must be used only for qualified educational expenses. These expenses, defined by the financial aid office of the student's college or university, include tuition, room and board, fees, books, equipment, commuting expenses and computer purchases. The money may not be used to purchased fixed assets like houses, vehicles or boats.

Excess Awards

Some institutions allow students to obtain the maximum amount of federal financial aid even if the student has no educational need for the money. For example, a public university may charge $5,000 in tuition and $7,500 in room and board each year. A student may have the option of taking a loan for $12,500 despite not taking a full-time load of classes and living off-campus. The award money not taken by the school will be refunded to students as a lump-sum payout. Many students use their "refund" money for ordinary expenses or to pay down bills. Be aware, however, that the law and the loan agreement requires students to use loan money only for qualified educational expenses. Penalties can range from disqualification from future awards, to criminal prosecution for defrauding the federal government or mail fraud, with penalties as high as 20 years in prison and $250,000 in fines.

Auto Loans

Most auto loans are secured, so with a minimal up-front down payment of as little as $1,000, most people -- even with no or bad credit -- can qualify for a loan program. Subprime loans are typically more expensive than loans to people with solid credit.

"Student Auto Loans"

Some websites advertise a "student auto loan" with misleading language that implies that a student can get a car just as quickly and easily as a student loan. Beware the fine print, however--"student auto loans" are merely personal loans marketed to students and have no relationship at all to the ordinary student-loan process.