<p>I was talking to a guy at my bank, asking if they had any student auto loans, where you could get a loan for a car and defer it until after graduation. He said what they could do instead was cut me a check for an auto loan, then later cut a check for a student loan, and I could pay off the auto loan with the student loan, hence buying the auto and waiting until after graduation to pay.</p>
<p>Can I do this, or is he giving me bad advice? I remember applying for student loans and they said that you must use student loans for your educational expenses only. Isn't buying a car part of the transportation expense?</p>
<p>It is illegal to use student loans to pay for non educational obligations. When you sign for your student loan I think you will also be asked to sign a document pledging that you will use the funds only for educational purposes and this does not include driving to class.</p>
<p>Mizo is right. Your Master Promissory Note will tell you that Federal Funding (Loans and Grants) can only be used for educational expenses....and as much as a car might better your educational experience, it isn't considered by federal guidelines to be an educational expense. Typically, bankers are also the worst people to receive advice from regarding what can or cannot be done with federal funding....unless of course, they come from a backgroud in financial aid.</p>
<p>Besides, if you take your loan money and pay off your auto loan, how will you be able to pay yoru tuition?? If you can't afford the auto or the loan now, then you won't be able to afford to pay the tuition when it comes due, which would mean you wouldn't be able to start class and all of your loan funds would be returned to the lender and you could be left owing the school a nice chunk of change.</p>
<p>I was not under the impression that the OP was even referring to federal loans. It sounded like he was talking a personal loan. That being said, you might get say a 10 grand loan, and prepay the interest.....receiving....whatever (too lazy to run any numbers) say $8500 to buy your car.... Now assuming this "guy at the bank" was a loan officer, or other official, and not some dude emptying the trash cans....He could structure a priv. loan probably any damn way he pleases.</p>
<p>Cash is liquid. Once you get loan proceeds, it's cash.....cash is liquid. Was 2 times enough? </p>
<p>I've seen scenario's any number of ways. But usually the scenarios involve timings within the same year. Beyond that....Do what you will. Its not like you have S-O auditors assuring matching of revenues and expenses.</p>
<p>I think some of the responses here are making other assumptions that may be inaccurate as well. Like that the OP cannot afford the car, that he will use loan proceeds to pay off the car loan, or that he will not use loan proceeds to pay for educational expenses.</p>
<p>But I do agree that the purchase of a car is NOT a qualified educational expense. Hopefully OP you see my point.</p>
<p>Actually, the excess funds above tuition and refunded to the student are not allowed to be used for anything except education expenses. Also, the OP clearly states that the auto loan would be repaid with a student loan. Therefore, the only conclusion one can make is that the student loan would be from Federal Funding, either a Stafford or Perkins....both of which have strict policies in place regarding how those proceeds can be spent. And while there may not be an auditor looking over everyone's shoulder all the time, is fraud really something you would be willing to take a chance on? </p>
<p>And, as a Financial Aid Counselor with experience in my field and colleagues who have been in general banking....most bank officiers have little to no knowledge of STUDENT LOANS. They are trained in private loans....but that is totally different than a student loan.</p>
<p>DS's federal direct student loans were dispersed directly to his university...not to him. DD's direct student loans were also dispersed directly to the university, not her. There would NOT have been any way for either of them to use this money for anything but college because the money went straight to the colleges.</p>
<p>I got the car. My parent's took out an auto loan. I have to take out a private loan now to pay for the education that they normally pay for, that went towards the auto loan.</p>