Yes, I'm well aware. Students, once they get their loan checks, can spend them on whatever they want (as long as tuition and fees are paid - which is usually taken out before they see the rest).
That's why, at loan disbursement time, you see students entering into leases, buying cars, etc (and promising themselves they will save the rest for the next month's payments).
I never said you can't use loans for living expenses.
My point is that federally insured loan programs only fund X numbers of units per student (rectified by certain programs called "high unit majors" - but the major has to meet federal requirements). Most loans are federally insured (not all, though). High units majors include nursing, some forms of engineering, etc. Everything else is capped (strictly) at 120 units per person.
I have to sign, under penalty of perjury, that I certify to the federal government that a failing student at least attended class. Right now, there's talk of making us (the professors) even more accountable for making sure students attend (!)
Student loan disbursements happen twice a semester - almost no one is dropped before the first disbursement, because it is early. But we are strongly encouraged (by the feds/accreditation) to drop students (if the school allows it - many don't) if they are not attending (that's considered fraud by the feds - it's being prosecuted more and more, and it's devastating to the unwary student).
Students in general can use their "living expense" part of the loan for anything they want (which, where I teach, is mostly cars - it helps that most still live at home).
