Quoted from Markharris2000:Alot of people would agree that it doesn't really matter where the money from a student loan was used, since the money to pay for SCHOOL had to come from somewhere that the student was obligated and authorized to use. Its not a cash accounting process, its an accrual, so if the student qualifies for a student loan, but they pay for the tuition from their savings account, it doesn't really affect anything if they take their student loan check and buy a truckload of bubble gum with it.
The real question might be "How can a student with THOUSANDS of $$ of extra money get approved for a student loan?" Seems like qualifying for a student loan a bit more accurately based on true need might be a better question....
Um.. cash or accrual basis doesn't really matter. What matters is if you don't have to pay back the loan.