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If you’re in school and paying student loans, you may be wondering if those loans cover rent.
The answer is no. Student loans typically don’t cover rent, which makes it difficult to live on your own while going to school. If you want to live independently while attending school, consider working part-time or full-time while getting your degree. You can also consider moving back home with your parents until you graduate.
If you’re thinking about taking out a loan to pay for rent and other living expenses, it’s important to know that there are ways to avoid doing so. If possible, ask your parents or relatives if they will help cover the cost of rent. If that’s not an option for you, look into renting from someone who has a spare room or apartment they’re willing to share with another person (this is called “co-tenancy”). This way, each person pays half of what their landlord would normally charge for an entire unit—and all of the costs are shared equally between roommates!
Can Student Loans Be Used to Pay Rent?
Student loans can be used to pay for room and board, which includes both on- and off-campus housing. So the short answer is yes, students can use money from their loans to pay monthly rent for apartments and other forms of residence away from campus.
However, the housing location that a student chooses can dramatically impact the cost of a college education. Student loan debt is at an all-time high with students owing roughly $1.5 trillion in student loans as of February 2019, according to Forbes. And with the escalating costs of tuition and housing, the number of student loan borrowers—currently pegged at 44 million—is likely to continue to rise nationwide. Today, more than ever, students need to stretch their college loans as far as they can to cover as much of the tuition and housing expenses as possible.
Key Takeaways
- Student loans can be used to pay for room and board for a qualified student.
- Schools pay tuition and school-related fees from a student loan before releasing any funds to be used for housing-related expenses.
- On-campus housing tends to be more affordable, as it eliminates the need for furniture, security deposits, and utility payments.
- Students should weigh the costs of living on and off-campus and how much they can afford.
Understanding Student Loans and Housing Costs
Many people take out student loans to help offset the costs associated with post-secondary education, including housing costs. The average amount of student loan debt carried by borrowers from the class of 2017 was almost $29,000. As a result, it’s important to compare the costs of living on-campus and off-campus.
Although a student loan can be used to cover on-or off-campus housing, choosing a dorm might help save some money. Most dorms come furnished—at least with a bed, bureau, and desk in the room, eliminating the need to buy furniture. Some schools even include food in their housing costs. As a result, other than the occasional midnight snack and any extra meals, most students should be covered. Also, off-campus housing, such as an apartment, typically requires a security deposit and students are responsible for the utilities, such as heat and electricity. However, dorms do not require a security deposit, and utilities are included in the overall housing bill from the school.https://9bd35ef65a4fcf6a72070dcd68657716.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html
Dorm vs. Off-Campus Housing Costs
According to My College Guide, the average cost of living in a college dorm at a public school in the U.S. is $8,887 or $10,089 at a private school. That figure can be higher if you decide to live in a fraternity or sorority house. Compare that to the average rent for a one-bedroom apartment nationally, which sits at $959 per month. The rental amount doesn’t include meals, furniture, utilities, and other housing-related expenses.
Also, off-campus housing is usually more expensive in the cities, and there is a lot more competition for it. For example, if you’re attending a big-name college in a metropolis, like New York City, Chicago, Boston, or Los Angeles, expect to get hit with a big bill—not only for your tuition but also for additional costs like housing. If you’re a U.S. citizen or eligible noncitizen, you can apply for federal funding, provided you have a high school diploma or equivalent certificate, and you must be enrolled in an eligible school.
The sooner you know where you want to live—on or off-campus—the sooner you can assess how much money you need. It’s important to fill out the Federal Application for Free Student Aid (FAFSA) as early as possible in the prior academic year.
Student Loan Disbursements
So you’ve been approved for your student loan. Great! But, don’t rely on using all of that money for your housing just yet. Remember, higher education institutions pay your tuition and other school-related fees first, especially if you’re not receiving any other financial aid such as Pell Grants or scholarships. The school will likely take out the money from your loan proceeds to pay for your on-campus housing as well if you’re living in the dorms.
Schools pay for tuition and other school-related fees before releasing any remaining funds to a student.
Once these expenses are paid, the institution sends you any leftover loan money—usually by direct deposit into a bank account. This amount can, of course, be used for rent, which means you can start writing out your rent checks if you’re going to live off-campus.
If you’re planning to take a full course load and have no financial aid other than student loans, you should realize there may not be enough loan money left over to pay monthly rent for an entire semester or academic year. Planning ahead and ensuring enough financial aid is available to cover tuition, fees, and rent is important.
Handling Disbursement Delays
College financial aid departments usually do not disburse leftover student loan money until after the start of the academic year, and landlords always want security deposits and monthly rent on time. If you’re seeking off-campus housing, you should make sure you have enough money to cover these costs, whether from family contributions or part-time employment, until they receive their student loan disbursement. Alternatively, you may want to look for a roommate for your off-campus housing. By sharing your living space, you can cut down how much you owe on rent every month, along with any other housing-related expenses like utilities and food.Compete Risk Free with $100,000 in Virtual CashPut your trading skills to the test with our FREE Stock Simulator. Compete with thousands of Investopedia traders and trade your way to the top! Submit trades in a virtual environment before you start risking your own money. Practice trading strategies so that when you’re ready to enter the real market, you’ve had the practice you need. Try our Stock Simulator today >>
Student loans — both federal and private — can be used to cover more than just your tuition. They can also cover living expenses, such as housing, groceries, toiletries, and more.
These expenses are factored into your school’s cost of attendance (COA), which is used by lenders to determine how much money you should receive.
Below, we’ll explain when a student loan can be used for living expenses, which lenders offer these loans, how the process works, and more.
Prefer video? Check out our video on using student loans for living expenses:
When student loans can be used for living expenses
When you take out a student loan, the funds are first sent directly to your school and applied towards tuition, fees, and room and board if you live on campus.
Any funds that remain, are sent to you directly in one lump sum to use as needed.
Here is a list of some living expenses that can be covered by student loans, according to the lenders in the next section:
- Room and board
- Off-campus housing
- Utilities
- Transportation (parking pass, gas, public transit, etc.)
- Food (groceries, meal plans, etc.)
- Personal supplies (toiletries, medication, etc.)
- Housing supplies (sheets, towels, microwave, etc.)
For a more in-depth list, check out our guide on what student loans can be used for.
Student loans that can be used for living expenses
First, you should consider your federal student loan options. If you’ve done that, then consider the private lenders below that offer student loans that can cover living expenses. Make sure to only borrow what you need to limit the amount you need to repay after graduation.
College Ave
Fixed Rates
3.22% – 13.95%
Variable Rates
0.94% – 12.99%
Loan Amounts
$1,000 – 100% of the school-certified cost of attendance
College Ave is our top-rated private student loan partner. The company offers loans for undergraduates, graduates, career training, and parents.
According to the lender, money from your loan can be used for tuition, room and board, housing, textbooks, supplies, transportation, and more.
Some benefits of College Ave include low rates, the ability to choose your loan terms, and no fees to apply.Loan details
Sallie Mae
Fixed Rates
4.25% – 12.59%
Variable Rates
1.13% – 11.23%
Loan Amounts
$1,000 – 100% of the school-certified cost of attendance
Sallie Mae is the most well-known private student loan lender in the industry, offering student loans for undergraduates, graduates, career training, parents, and more.
According to the lender, its loans can be used for tuition, room and board, off-campus housing, transportation, sheets and towels, and more.
Some benefits of Sallie Mae include four months of free Chegg study help, multi-year advantage, and the quickest opportunity for cosigner release.Loan details
Earnest
Fixed Rates
3.24% – 12.78%
Variable Rates
0.94% – 11.44%
Loan Amounts
$1,000 – 100% of the school-certified cost of attendance
Earnest is an online lender offering student loans for undergraduates and graduates.
According to the lender, its loans can be used for tuition, room and board, linens, kitchen supplies, transportation, dependant care, and more.
Some benefits of Earnest include no fees, a quick two-minute eligibility check, and the ability to skip one payment per year.Loan details
Discover
Fixed Rates
3.99% – 11.59%
Variable Rates
1.29% – 10.59%
Loan Amounts
$1,000 – 100% of school-certified costs
Discover offers student loans for undergraduates, graduates, and parents.
According to the bank, loan money can be used for tuition, fees, room and board, books and supplies, transportation, and personal expenses.
Some benefits of Discover include a reward for good grades, an automatic payment rate discount, and no origination fee.Loan details
How to use student loans for off-campus housing
It’s actually really easy to use student loan money for housing and other living expenses. Just be sure to spend the money on only the things that are absolutely necessary.
Here’s how you do it:
- Deposit Student Loan Refund Check: Once you receive the student loan refund check from your school, you can deposit the money into your bank account just like any other check.
- Pay Rent or Other Housing Expenses: Simply write a check or make payments however you typically would from your bank account for rent as if it were your own money.
- Monitor Account Balance: It’s important to remember you won’t get any more student loan funds until the next semester or year, so you should monitor your account balance to ensure you will have enough funds to afford the rent for the whole semester.
- Avoid Unnecessary Spending: Unfortunately, some students use student loan money for unnecessary expenses (like spring break). Be sure to reserve your student loan money on only those expenses that are absolutely necessary. Remember: you will have to repay all of the money, with interest.
Good money management practices can make your student loan funds stretch further so you can borrow smaller amounts or use some of what you borrowed to make optional loan interest payments while in school.
Federal student loans vs. private student loans for housing expenses
You should be aware that federal student loan funds do not typically process until about four weeks after school starts. In order to be settled and ready for the first day of class, you may need the first month’s rent and any necessary security deposits before your loan money comes in.
Private student loans are offered by banks, credit unions, and online lenders and are handled differently than their federal counterparts. Because approval for a private loan is based upon creditworthiness instead of financial need, the money is often disbursed directly to you to pay the expenses you need.
Living off student loans: dos and don’ts
Student loans may seem like free money, but the debt you take on can follow you for years to come. If you run out of student aid too soon, you could find yourself forced to rely on credit cards or personal loans to pay the bills — which could put you even further in debt.
Since most college and graduate students have little or no time to work and earn money while in school, it’s even more important to be responsible with your spending to make sure your loan money doesn’t run out and force you into this bad financial situation.
The key to keeping your borrowing costs at a minimum is to know what you should and shouldn’t spend your student loan money on. Here are some things it’s good to pay for with student loans:
- Tuition costs and fees
- School activities that enhance your resume or deepen your learning
- Study abroad programs that give you exposure to different cultures and the chance to learn new things while living in a foreign country
- Books and other supplies you need for classes
- Essential living expenses, including reasonable rent, food, toiletries, and personal items
- Tutoring or training you need to excel in your college career
- Professional testing, certificates, or licensing
- A computer you need to perform schoolwork
Some of the things you shouldn’t use your loan funds to cover are:
- Spring break trips
- Nights out at bars
- An expensive apartment
- Designer clothing
- Expensive electronics
- Restaurants or takeout
- Treating your friends
- Buying a car you don’t absolutely need to get to class (or buying a vehicle that’s too expensive)
Can I get in trouble for misusing student loan funds?
Your student loans are supposed to be used for educational expenditures and essential living expenses. If your student loan lender finds out you’re misusing funds, such as by paying for spring break trips or bar-hopping, it’s possible your loan could be terminated and you could be forced to pay back the full amount borrowed.
However, it’s very unlikely lenders will look into what you’re using the funds for or take any action if they find out you’re having some fun with your student aid money. Their main concern is your ability to repay the loan.
Bottom line
Although you want to borrow the minimum amount of money you need to attend school and have a reasonable standard of living, you need to avoid taking out too many student loans.
Student loans for living expenses are available, but it’s important to use the money wisely so you don’t run out of money and need to take on other consumer debt during the course of the academic year.
Student loans are a great way to finance your education, but they’re not the only option. If you’re struggling to find a job or get enough hours at work to make ends meet, you may be able to use your loan money for rent instead.
While we don’t recommend this as a long-term solution, it can be helpful in a pinch when other financial resources are scarce. You’ll want to take care of your student loans as soon as possible and build up other sources of income so that you can pay off your debt and get back on track with saving for goals like buying a house or saving for retirement.
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