Can I Use Student Loans to Pay for Rent?

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Benjamin Roussey

By Benjamin Roussey

April 6, 2022

You can use a student loan to pay for rent for off-campus housing during college. In fact, you can use student loan funds to cover a college‘s full cost of attendance, also known as the student budget.

Cost of Attendance

A college‘s cost of attendance (COA) includes room and board in addition to tuition and fees, books, supplies and equipment, transportation and miscellaneous expenses.

Most colleges have four student budgets based on where the student lives:

  • On campus in the college dormitories or other college owned or operated housing.
  • Off campus housing, such as an apartment.
  • At home with parents.
  • On a military base or receiving a basic housing allowance from the military. (In this case, the student budget will include costs for meals but not for housing).

There may also be other student budgets for students who are married or have dependents.

You can use student loans to pay for the cost of the apartment and housing expenses, up to the allowance specified by the college.There are no restrictions on where the apartment is located, and the apartment does not need to be near the college campus.

How Student Loans are Disbursed

Student loan funds are sent to the college, not to the student.

The college will apply the student loan funds and other financial aid first to college tuition and fees. If the student is living in the dorms or other college housing, the money will also be applied to room and board.

If a credit balance remains, it will be “refunded” to the student within 14 days. The student can use this money to pay for rent, textbooks and other college costs.

Since the loan proceeds will be paid to you in a lump sum, you will have to manage the money carefully to have enough money available to pay your off-campus rent each month.

Some colleges have “Pell as a paycheck” programs where a Pell grant recipient gives them permission to hold onto the money and they disburse it in monthly or biweekly installments. But, you may be better off depositing the student loan money to a bank account so you can control the timing of the rent checks.

Submit the FAFSA Every Year

To receive a federal student loan, you should complete and file the Free Application for Federal Student Aid (FAFSA) the moment you commit to go to college your senior year of high school. This is the application that allows the federal government to consider your case, and includes details like your parent’s economic background, your dependency status, and your academic and extra-curricular achievements. The federal government also considers inputs from your school, to determine the final student loan amount that you qualify for during that academic year.

This means that federal student loans are decided for the entire academic year, and need to be renewed on a yearly basis. This may also be accompanied by qualifying criteria to maintain your eligibility for the student loan. (This typically includes enrolling for at least half-time classes each semester, maintaining a required GPA, etc.)

If you exhaust your federal student loan limits, you may consider borrowing a private student loan. Federal student loans (from the government) are preferred over a private student loan (from banks and private lenders) because they come with many perks, including:

  • Potential for subsidized loans
  • Potential for student loan forgiveness
  • Options to make student loan payments based on your income and family size
  • Options to pause payments if you lose your job or have an economic hardship
  • Generally have a lower interest rate

If you do wish to borrow private student loans, shop around to find the best lender for you .

How to Return Unused Federal Student Loan Funds

It’s important to keep your student loan debt to a minimum. Even if you have a subsidized federal loan with a low interest rate it will still need to be paid in full once you leave school. But, sometimes it can be difficult to predict how much you’ll need to borrow.

For instance, consider that you were able to minimize your expenses mid-way through a semester, perhaps by taking on a roommate, or by picking up a job that includes meals. In this case, you may end up with leftover student loan money. Rather than use it on non-urgent expenses, consider returning your unused student loans back to the government. If this is done within 120 days, you will not incur interest for the corresponding loan amount.

Things to Consider When Paying for Off-Campus Housing

Living off campus in an apartment can be a great way to save on room and board, especially if you get a roommate to split the rent. But, it can also increase costs if you need to commute to school.

Using student loan money to pay the rent will also increase your costs, since student loans must be repaid, usually with interest. Every dollar you borrow will cost you two dollars by the time you repay the debt.

You may be able to reduce costs by living on-campus in a dorm. For example, some colleges offer an opportunity for students to be a Resident Assistant, which can come with free or discounted housing.

Dorm life is also more convenient. A typical college dorm comes furnished with a bed and desk (perhaps even a wardrobe), and includes basic utilities like electricity, water, heating, internet, etc. This works out much cheaper than off-campus living, as you total up expenses related to rent plus deposit, furniture, and monthly utilities.

Also, an increasing number of schools provide three daily meals for on-campus students. The cost of these meals are factored into the COA, which means that the school will automatically deduct it from your student loan.

A good place to start:

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