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With living expenses and rents around the country creeping ever higher, college students may be nervous about affording a house or apartment near their school in addition to their tuition, books, and other expenses.
They may be relieved that you can use student loans for housing, even off-campus housing.
In fact, students can use student loan funds to cover the full cost of attending college or university.
Cost of Attendance and Its Impact on Housing
The cost of attendance (COA) at a college includes room and board, tuition and fees, books, supplies and equipment, transportation, and miscellaneous expenses.
COA is also known as the “student budget.”
Many colleges have two or more different budgets based on where the student lives:
- On campus in the college dormitories or other college-owned-or-operated housing
- In off-campus housing
- At home with parents or other relatives
- On a military base or with basic housing allowance from the military (in which case the student budget will include meal costs but not housing)
- With children or other dependents
You can use student loans for housing off campus up to the allowance specified by the college. The apartment doesn’t need to be near the college to qualify.
Managing Loan Disbursement to Pay Rent
The lender will send your student loan funds to the college, not to you directly.
The college will first apply for loan money and other financial aid for tuition and fees. If you’re living in a dorm or other college housing, the money will be applied to room and board next.
If a credit balance remains, you’ll receive the student loan refund within 14 days. You can use this money to pay for rent, textbooks, and other college costs.
Since your school will pay the loan proceeds in a lump sum, you must manage the money carefully to pay your off-campus rent each month.
If you’re using student loans for housing expenses, it may be a good idea to put aside the total rent you’ll need to pay until the next installment of your student loan comes in. That way, you won’t have to worry about spending it by mistake.
Some colleges may have “Pell as a paycheck” programs where a Pell Grant recipient permits them to hold onto the money, and they disburse it in monthly or biweekly installments. However, you may be better off depositing the student loan money into a bank account to control the rent checks’ timing.
Submit the FAFSA Every Year
To maintain your federal student loans, you must complete and submit the Free Application for Federal Student Aid (FAFSA) for each academic year. You may also need to meet other criteria, like enrolling in classes at least half-time or holding a particular GPA.
You may consider private student loans if you exhaust your federal student loan limits. Federal student loans (from the government) are generally better than private loans (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, lower interest rates
If you borrow private student loans, shop around to find the best lender for you. It’s important to note that having an acceptable credit score or finding a co-signer may be necessary when submitting your application.
How to Return Unused Federal Student Loan Funds
Even if you have a subsidized federal loan with a low interest rate, you want to keep your student loan debt to a minimum. After all, you’ll need to pay back everything you borrowed, with interest, when you leave school.
However, it can sometimes be difficult to predict how much you’ll need to borrow to cover your expenses.
Say you were able to cut your expenses midway through a semester, perhaps by taking on a roommate or picking up a part-time job that includes meals. In this case, you may end up with leftover student loan money.
Rather than using it on non-urgent expenses, consider returning your unused student loans to the government. If you do this within 120 days of disbursement, you will not incur interest on that loan amount.
Things to Consider When Using Student Loans for Housing Off Campus
Living in an apartment off campus can be a great way to save on room and board, especially if you split the rent with a roommate. But it can also increase costs if you need to commute to school or have trouble managing money for groceries.
Using student loan money to pay the rent can also increase your costs since student loans must be repaid, usually with interest.
On the other hand, you may reduce costs by living on campus in a dorm. Some colleges offer an opportunity for students to be resident assistants, typically upperclassmen who offer peer guidance and resources to students living in a dorm. This job typically compensates with a private room, a paycheck or stipend, and potentially free or discounted housing.
Dorm life can also be more convenient. You typically won’t have to buy much furniture if you live in a dorm, and you won’t have to pay a security deposit or utilities like you would if you rented an apartment off campus.
Consider your options carefully when you’re deciding where to live when you’re in school. Each option has pros and cons concerning cost, privacy, and convenience.
If you decide living off campus is best, you can use your student loans for housing costs. Just know that you’ll be paying interest on that rent down the road.
